Should you get a 30-year or longer mortgage?

The average period for repayment of a mortgage is 25 years. But, according to research by mortgage broker L&C Mortgages, the number of first-time-buyers taking out a 31 to 35-year mortgage doubled between 2005 and 2015.

Other financial pressures mean new house buyers are opting for longer-term mortgages, so the lower repayments leave them with more money to spend day to day.  

So, what are the pros and cons of paying off your mortgage over a longer period? 

Let’s assume you’re buying a £250,000 property at a rate of 3% and have a 30% deposit. Borrowing £175,000 over 25 years would cost you £830 a month. Adding an extra five years brings the monthly repayment down to £738, while a 35-year mortgage would only cost £673 a month. That’s £1,104 or £1,884 less each year.

However, lowering your monthly mortgage repayments doesn’t add up to overall savings.

Using the example above, over 25 years you’ll actually repay nearly £249,000 by the time you’ve repaid the initial debt. That’s £76,000 in interest.

Increase the term to 30 or 35 years and you’ll spend an extra £16,500 or £34,000 respectively over the full term you’ve borrowed the money.

These added costs don’t mean you shouldn’t take advantage of lower repayments, especially if paying less each month is the only way you can afford to get on the housing ladder.

However, it’s worth checking the mortgage deal to see if you can overpay. Being able to do this without penalties gives you added flexibility if you get a pay rise or a cash windfall. You can also pay the contractual amount if times get tough.

It’s certainly worth thinking about as any extra money you put into your mortgage over your standard monthly amount will shorten the total length of the mortgage, saving you additional interest over the lifetime of the mortgage.

The longer the mortgage term, the older you’ll be when you make the final repayment. That might not be a problem as some mortgage providers have increased its limit to 80 years old, but you are less likely to be working and therefore bringing in as much money every month.

Of course, it’s not just long term mortgages you need to plan for. Any mortgage loan you apply for is going to be subject to some affordability tests to make sure you really can make the monthly repayments, even if circumstances change.