Friday, 21 July 2017 10:54

How Long Can a Mortgage Term Go?

The traditional length of time a mortgage lasts for is 25 years. Years ago, that was the mortgage term most people went for. But according to recent news reports, that could be about to change. Some mortgages might even be about to go intergenerational where the term gets passed down to your children.

More and more mortgage applicants are opting for longer mortgages, some of which are agreed on 30-year or even 35-year terms. We scoured the market to find news reports about 35-year mortgages that date back to early 2016, so this is not a new thing. However, recent months have seen a marked rise in the number of people opting to take out a mortgage over a longer period than the traditional 25-year term.

It’s not hard to understand why. The longer the mortgage lasts for, the cheaper the monthly repayments will be. However, there is a downside – namely that the total amount paid over the life of the mortgage will be a lot bigger. Problem is, there are many people who cannot afford the repayments on a 25-year mortgage, let alone anything less. Extending the period by five or even 10 years can make a mortgage a reality for some people – people who wouldn’t otherwise be able to own a home of their own.

So, in answer to the question, a mortgage term can be for far longer than you might think. But you should weigh up the pros and cons of going for a longer term. Firstly, you do have the immediate advantage of enjoying lower monthly payments. But if this is the only way you can afford to get a mortgage, and payments will be tight even with a longer term, you should consider whether it’s the right time for you to buy. What would you do if interest rates went up – as they surely eventually will? That being said of course, the recent understanding is that they could still fall as inflation drops away.

Moreover, you should think about the ramifications of having a mortgage for five to 10 years longer than you would normally. Depending on your age, you could well be close to retirement by the time you pay it off – or even well into retirement age. How would this affect your situation? Would you find it difficult to meet the monthly payments once your income was reduced – as it may well be – when you are retired?

You can see there are lots of things to think about when considering the option of a mortgage with a longer term. It’s not just about assessing your finances now, it’s about considering where you might be in the future. No one can look into the future and have a sense of what might happen, of course. But planning is important, because it means you have a plan to go on. That plan can be adjusted or changed, but you should have one.

It’s always better to go for the shortest possible mortgage term you can. The rise of the 35-year mortgage doesn’t make it a good choice for everyone, although it may be better for some. What would make more sense in your situation?