You are here: Home - Mortgages - First Time Buyer - News -

The benefits and drawbacks of opting for a longer mortgage term

Written by: Paloma Kubiak
First-time buyers are increasingly opting for 30 and 35-year mortgage terms over the more traditional 25-year term. Here are the pros and cons of such a move.

New homeowners are turning to longer mortgage terms as they ditch the traditional 25-year mortgage term.

Data from UK finance revealed that in 2017, around 27% of all new homeowners took out 30-year mortgage terms while 4% took out 35-year terms.

In fact, the trend for longer mortgage terms has been on the up since 2009, having risen steadily from the 11% of 35-year mortgage terms recorded during the financial crisis.

Going back further, UK Finance found that in 2005, 6% on new house purchase mortgages were on a 35-year term.


Pros and cons of longer mortgage terms

Longer mortgage terms tend to have lower monthly repayment option, which provides people with an affordable route to homeownership.

A UK Finance spokesperson, said: “This demonstrates how providers are lending responsibly and making sure borrowers can afford their mortgages.

“Most mortgage products also allow early and increased repayments or overpayments, giving customers the flexibility to manage their finances and adapt to new circumstances.”

However, Rachel Springall, finance expert at data site Moneyfacts, said opting for a longer mortgage may seem like a good idea on outset, but borrowers will ultimately repay more in interest.

She said: “Borrowers will find that the monthly repayment can be more manageable than if they opted for a shorter mortgage.

“However, lowering the monthly repayment does not lower the overall cost of your mortgage, as you end up paying out more in interest due to taking longer to repay the debt (as interest is charged on the borrowed sum until it is repaid).”

Springall suggests that the best course of action for new borrowers is to get a couple of quotes for the mortgage before applying, such as a 25-year mortgage term versus a 30-year mortgage.

“At this stage, both the monthly repayment and the overall cost of the mortgage should be compared. If borrowers can stretch their cash it’s worthwhile to pick a shorter deal and also to consider overpaying to shorten the term even further.

“As always, it’s worth seeking independent financial advice to help navigate the mortgage minefield,” she added.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

Which ISA is right for you? A round up of the six products available in 2017

From cash to innovative finance to lifetime, here's our guide to the ISA products available to savers this yea...

Guide to buy-to-let tax changes

In late 2015, former Chancellor George Osborne announced a range of  tax measures aimed at landlords, which t...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Five fund tips for a 0.25% interest rate environment

With interest rates stuck at a record low 0.25% and expectations rates could fall to close to zero, here are ...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Investing your money

Alliance Trust Plc gives you smart insight into how to invest your money

Money Tips of the Week

Read previous post:
mobile phone complaints
Millions of people take time off work to deal with faulty goods

A charity said the “odds are stacked against consumers” as it reveals more than three million people have taken time...