Longer-term mortgage: Pros and cons
What are the pros and cons of taking on a longer-term mortgage? Until fairly recently the typical term for a mortgage has been 25 years. But, as the younger generation struggles to get on the housing ladder, longer term mortgages of 30-40 years are becoming more popular.
Currently, over 50% of residential mortgage products have a maximum term of 40 years. This compares with just 36% five years ago. Furthermore, Bank of England data shows that over 40% of new mortgages in the last quarter of 2023 now have terms that take the borrowers beyond state pension age.
Why is this the case? Well, wages have remained static while living costs and property prices have soared. This has had a significant impact on the affordability of property ownership. The ability to pay off a mortgage within a 25-year period would be a struggle for many people.
Pros and cons of longer-term mortgage
The ability to spread costs over a 40-year period has its benefits:
Lower monthly repayments – A longer term mortgage with a lower monthly payment may make it more affordable and achievable to get on the property ladder.
More for your money – You may be able to increase the amount of money borrowed, meaning you can purchase a larger house to meet future needs.
Flexibility – You may have the ability to ‘overpay’ at periods when you are in a stronger financial position or move to a shorter-term mortgage at this point.
But of course, there are also disadvantages to long-term mortgages:
More interest – You might be paying a lower monthly amount, but the overall interest that you will pay is significantly more.
Later life impact – Do you still want to be paying off a mortgage as you approach or start retirement? How will you afford mortgage payments once retired? It is likely that the extended financial commitment will impact on your available pension pot.
If you are looking to get on the housing ladder or moving home, contact our specialist property team who can help guide you through every legal aspect.