According to UK Finance, the last two years have seen a dramatic increase in 40-year mortgages. In February 2023, 18% of all first-time buyers opted for a mortgage term of 35 years or more, compared to 8% in February 2022. According to Moneyfacts, 67% of all mortgage products currently available have a standard maximum term of up to 40 years.
The main benefit of borrowing over an extended period is that it helps with affordability, but at what cost? You’ll end up paying more interest overall.
A longer term may allow you to borrow more, so you’ll need a smaller deposit. However, you’ll need to be aware that the equity in your home won’t grow as fast as you’re paying the debt back more slowly.
You’ll also need to consider whether a longer mortgage term will mean that repayments carry on into retirement.
If you’re thinking of extending your current mortgage to reduce your monthly outgoings or you need advice on a new mortgage, it’s always best to speak to an adviser.
18 August, 2023