Maximum Mortgage Repayment Term
For many people looking at purchasing a property, despite more than a 14% deflation in the past year (July 08 to July 09) property prices are simply to high to purchase with a ‘traditional’ mortgage.
Historically, mortgage lenders in the UK would offer a maximum repayment term of 25 years, however to help more people get on the property ladder many lenders have extended their maximum repayment term.
It should be understood that as of writing this article, some mortgage lenders are reducing the max mortgage term they will lend over. That being said there are still plenty of lenders offering mortgage repayment terms of up to 50 years!
While a longer mortgage term may seem attractive to people struggling to get on the property ladder, there are other factors that should be considered:
Lower Monthly’s but Higher Life Time Cost
While you will be paying less per month on a repayment mortgage as the capital is spread over a greater term, you will over the course of the mortgage repay much greater amounts of interest, after all you are borrowing for a longer term.
You may also suffer from worse rates in the first place, meaning your loan interest is even further inflated.
Consider your retirement, even if your lender doesn’t
Many lenders will only offer mortgage terms up to the standard retirement age of 65 for example:
25 year old john can get a 40 year term where as 30 year old James can only get a 35 year term from lender “45 year Max Mortgage Term Ltd”
For those seeking lending from a mortgage lender who does not have such a limit, we would suggest you consider your spending power in retirement carefully; what you can easily pay for now with a job may not be so easy to pay on a pension.