Long Term Mortgage

Purchasing a house in the UK has become a reasonably easy process, along with the way in which it can be paid back.

Traditionally a mortgage repayment term would be in region of a maximum of 25 or 30 years before amortisation occurred. However some modern day mortgages are set to be way beyond the traditional limitations and are pushing the repayment periods up to 40 and 50 years.

We have collated some of the things you need to know with regard to long term mortgages.

Reduced Payments:
Since the payments are stretched out over a greater period of time, the monthly repayment is also greatly reduced. This point is usually the main unique selling point. If you are looking to reduce your monthly payments for some reason or other, then this may help you achieve jus that. However as all things in life there is a catch! If the term is extended then the level of interest will of course be greater as the longevity has been extended.

Calculate Total Costs:
Should you wish to analyse the real cost of a long term mortgage you should sit down with the details of a 25 or 30-year mortgage, and compare the figures. This is being even more important, if you are considering refinancing an existing mortgage.

Advantages of a Long Term Mortgage

A long term mortgage can be very handy under some circumstances. For instance, if you are planning on buying property with the intent to renovate it and then resell it, this type of loan would actually allow you to minimise your expenses and monthly payments, during the renovation period. Another situation would be when buying a rental property; while you have tenants you pay extra on your monthly payments, and in those in-between months, you just make the low regular payment.

A long Term Mortgage could allow you to get a larger house than you could otherwise afford.

Disadvantages of a Long Term Mortgage

A long term mortgage can work against you. The added interest has already been discussed, but another major consideration should be the value of the house itself. Forty or fifty years down the road, what will the house be worth? and what will the housing market be like. While these are unknowables, you should take a moment or two to think about it.

If you should decide to go with a long term mortgage, be sure to compare it to several other offers. This gives you a degree of flexibility as well as the opportunity to choose the best offer. Also, be sure that there are no early payment penalties so that you could pay it off early if you are able.

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