Should you get an extra long mortgage?

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Believe it or not, you can in theory get a mortgage that lasts for just a couple of months as some lenders don’t have minimum mortgage length requirements.

Of course, few people would want to get a mortgage so short.

For one, it’s expensive. A shorter mortgage generally entails higher monthly costs, not forgetting the one-off fee that some lenders charge.

And then of course you have to ask yourself why you would ever need a mortgage so short when you could get a bridging loan that might actually work out cheaper.

On the flip side, the longest mortgage you can get right now is a 40-year one – although Boris Johnson did float the idea of multi-generational mortgages that last even longer.

These extra long mortgages can make monthly payments much, much more affordable, but they might end up costing you more in the long run. Here’s what you need to know.

How your monthly repayments are worked out

First, a little primer on how your monthly mortgage repayment works.

You can think of your monthly mortgage repayment as determined by three factors.

The first is the amount of money you’ve borrowed, known as the principal.

The second is the interest rate, and this is essentially the cost of borrowing and how lenders make their money.

And finally there’s the length of your mortgage, which determines the number of payments you have to pay off the loan.

Your monthly mortgage repayment is loosely worked out by adding the interest you expect to repay each month to the principal you expect to repay each month.

The reality can be a bit more complicated of course – for example if you start making overpayments, or the interest rate changes – but the idea is the same.

Pros of an extra long mortgage

The main reason for getting an extra long mortgage is affordability, which makes it particularly attractive to first time buyers and those on a tighter budget.

“Having an extra-long montage will typically involve lower monthly payments, simply because the principal is spread out over a longer period of time,” says Amer Siddiq, founder and CEO of Landlord Vision.

If your principal is £100,000 for example, spread over 10 years, you’d be paying about £833 a month.

But if it’s spread over 30 years, your monthly repayment drops to around £277, which is much more manageable.

Because repayments are predictable and relatively low, it can give borrowers more autonomy over how they allocate their funds, according to Siddiq.

Cons of an extra long mortgage

There are several downsides to having an extra long mortgage though, starting with the fact that it will cost you more over time.

In the example above, you’re only repaying the principal – but a mortgage repayment also includes the interest rate.

Assuming the interest rate is 5%, over 10 years, you’d be looking at an interest payment of around £27,279 on top of your principal. 

When you spread the repayment over 30 years, the interest repayment becomes £93,256 – almost doubling what you owe.

Then there’s the fact that you’re in debt for a longer period of time, which could affect your financial freedom and, depending on your circumstances, have negative implications on your credit score, according to Siddiq.

In particular, fluctuating interest rates can be a big concern.

It’s also worth bearing in mind that it’ll take much longer to build up equity in your property (the proportion you own rather than owe).

This last point means that extra long mortgages are best suited for those who intend to stay in the property for several decades.

A few other things to consider

The pros and cons of a 40-year mortgage make it sound quite bleak, but it doesn’t have to be.

The assumption has been that you would get one mortgage and stick to it, repaying the same amount of money each month until you pay it off.

But the reality is that people can change their mortgages when their circumstances change and aren’t required to just stick to one product.

So you could take out an extra long mortgage with a period of fixed interest rates to start with and then swap to a shorter 25-year mortgage once you’ve built up enough equity or you get a big pay increase.

You could also make overpayments to your mortgage to build up the equity faster, and reduce the length of your mortgage at the same time – just make sure there are no penalties for doing this.

Interest rates will be a big consideration too.

If interest rates are low, it’s cheaper to borrow, so you might be better off putting your spare cash elsewhere rather than trying to pay off your mortgage as quickly as you can.

Basically, it all depends on your circumstances so it’s worth speaking to a mortgage advisor before setting your heart on one.

Why you’re unlikely to get a 40-year mortgage

Got your heart set on a 40-year mortgage? The likelihood of you securing one is actually pretty low.

There aren’t that many lenders offering the product to begin with and the ones that do will adjust the length of the mortgage according to your retirement age.

Assuming you’ll retire at 68 – the state pension age for those born after 1 January 1979 – the latest you could apply for a 40-year mortgage is 28.

And then there’s the fact that there may be stricter lending criteria. 

Gary Hemming, financial expert at ABC Finance, explains: “From a commercial lender’s viewpoint, extra-long mortgages may be suitable for certain clients but require careful consideration.

“Such mortgage products may be more appropriate for individuals with stable incomes, as the extended term can introduce higher uncertainty over time. 

“Lenders would emphasise the importance of thoroughly assessing the borrower’s financial stability, future income prospects, and overall repayment capacity.”