Should you get a 30-year or longer mortgage?

The average mortgage term for first-time buyersOpens in a new window is now 31 years.

Your mortgage term is how long it will take you to pay off your mortgage if you only make your normal monthly payments.

Because a longer mortgage term means lower monthly repayments, cost of living pressures means that first-time buyers are sometimes choosing up to a 40-year mortgage.  

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

Taking longer to repay your mortgage means you’ll pay less each month.

Let’s show this with an example.

In this example you’re buying a £250,000 property and have a 30% deposit of £75,000. That means you’ll need to borrow £175,000.

If your mortgage interest rate is 5%, borrowing £175,000 over 25 years would cost you £1,023 a month.

If you had a 30 year term instead of a 25 year one, it brings your payments down to £940 a month.

And if you had a 35-year mortgage that would cost £884 a month.

However, lowering your monthly mortgage repayments means your mortgage will cost more in the long run.

If your mortgage term is longer, then you’ll have lower repayments each month, but it will cost you more in total.

That’s because your interest is applied for every day you still owe money, the longer you take to repay it, the longer it has to grow.

Using the £175,000 example above, over 25 years you’ll pay £307,022 by the end of your mortgage. That includes £132,022 in interest.

For a 30 year term you’ll pay £338,337 in total. That’s an extra £31,315.

Or if you had taken out a 35 year mortgage you’d pay £371,116 over the full term. That’s £64,094 more than a 25 year mortgage.

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.

There are ways to pay less in interest, even after you’ve taken out a long mortgage.

Check your mortgage deal to see if you can overpay. Many lenders will let you pay up to 10% of your remaining balance per year.

That means if you owed £175,000, you could make overpayments of up to £17,500 each year. But ask your mortgage provider about their rules for overpayments.

Being able to overpay without penalties gives you added flexibility if you get a pay rise or a cash windfall. You can also pay the normal monthly payment if times get tough.

A one-off £1,000 overpayment in the first year of your 35 year mortgage example would save you £4,650 in interest and mean you repay your mortgage 6 months earlier.

Anything you pay over your standard monthly amount will shorten the total length of the mortgage or reduce your monthly payments.

Find out more about overpayments in our guide Should you pay off your mortgage early?

You don’t have to keep a 30 year or longer mortgage for the full 30 years or more. If you can afford it, you can remortgage to a shorter-term deal after your initial fixed term ends.

Read more about remortgaging in our guide.

For example, if you took out a 35 year mortgage costing you £884 a month, and kept it for the 5 year fixed term, that means you’d have 30 years left to pay.

You could then remortgage onto a 25 year term and pay £962 a month. This would mean you repay your mortgage 5 years earlier, and you would save £29,414 in interest over the full term.

Use our Mortgage repayment calculator to see what a different term can do to your mortgage. 

Most lenders won’t approve you for a mortgage if you’ll be over 70 or 80 when the mortgage ends.

If you’re 46 years old, then a 35 year mortgage means you’ll be 81 once the mortgage is paid off. You might have to choose a 25 or 30 year term instead.

Mortgage providers do this because they expect people in their 70s or 80s to be retired, so might have a lower income to repay a mortgage.

Of course, it’s not just long-term mortgages you need to plan for. You’ll have to pass affordability tests for any mortgage to make sure you can make the monthly repayments, even if your circumstances change, or interest rates go up.