Whether a longer mortgage term is right for you will depend on your individual financial circumstances. However, before choosing a deal, it’s important to consider all the pros and cons.
Choosing long mortgage terms means your monthly repayments will be lower and more affordable. For prospective new homeowners looking to secure a mortgage offer, especially those with smaller deposits and potentially a smaller choice of interest rates, extending the mortgage term could make the difference between affording a mortgage and staying in rented accommodation.
Taking on a longer–term mortgage also gives you more flexibility over what you do with your money. Your monthly repayments will be lower, so if you have any spare cash left over each month you could use it to top up your savings or pension, or even make an overpayment on your mortgage.
While you’re increasing your chances of affording a mortgage, you’re also increasing the overall interest you’ll have to pay back – perhaps by tens of thousands over the term.
And with a long–term mortgage, you will also be building the equity in your house more slowly, which could cause issues if the value of your property drops. If you plan to sell your house and buy another one in the future, the amount of equity you have is likely to affect whether you need to raise additional funds for your next purchase.
Additionally, there is the concern that with a longer–term mortgage you may be left with a mortgage to pay in later life, when you may have reduced income. Still having monthly mortgage repayments in your later years may impact when you can retire, or reduce how much you can save to top up your pension. This is of particular concern for the growing number of buyers not taking their first step onto the property ladder until their mid–30s.
You can use our mortgage payment calculator to compare what your monthly payments would be over different mortgage terms.