Daily Mail opp

ended 28. January 2022

A journalist at the Daily Mail / Thisismoney is writing an article on how long you should take a mortgage out for these days? Once upon a time, the default was 25 years, that crept up to 30 and now many go even longer. But can you save money by going shorter and should you always try to keep the same term or even cut at remortgage? Any thoughts, send them over. Bonus points if you can get the words ‘last tango’ in.
 

13 responses from the Newspage community

Star Quote
"If you are offered a 25-year term by your bank or a broker then the alarm bells should ring. This is lazy and poor advice that has failed to discover enough about you and your unique personal circumstances. A good mortgage adviser will discuss your income and outgoings and work with you to establish what a good mortgage and protection budget should be for you. Only by doing this can they then calculate what is a realistic amount for you to be paying each month, and then establish what mortgage term this leads to. For example, having completed a budget planner, if your mortgage budget can be £800 and after considering the interest rate and the amount you are borrowing this means a 23 year term is £798, then your term should be 23 years. By not going for the default 25-year term, the adviser will have saved you 24 monthly mortgage payments as well as the interest that another two year mortgage term would add to your overall payments."
Star Quote
"The mortgage term should always be decided based on the borrower's level of affordability, age and their future plans. Just automatically defaulting to 25 years is a lazy option. Many borrowers do not realise that they can actually take a term of 17, 21 or any specific amount of years. A professional broker will ensure that borrowers do not need to pay their mortgage any longer than they really need to, which could save them thousands of pounds in interest over the life of the loan."
"When it comes to mortgage terms, it's really simple. The shortest term possible where you can comfortably afford the repayments. Knocking 10 years off a mortgage term can save normal borrowers tens of thousands of pounds in interest and often more money than endlessly shopping around for the 'best rate'. My personal rule of thumb is that if a term ends in a 5 or 0, it's probably been plucked from thin air and that the borrower may not have had very thorough advice."
"There is no correct time to have a mortgage for these days. I've done mortgages for first-time buyers with terms ranging from 23 to 40 years. Forty years may seem a long time but some people just want to not pay rent and have as much money left as possible at the end of the month. Remember, the term can be reviewed when the fixed term ends too. Most mortgages come with the ability to overpay about 10% of the balance per year without penalty so most first-time buyers I speak to like the idea of a lower payment that they can overpay if they choose, without commitment to a higher payment, especially as the first year in a new house is very expensive. "
"There is never a hard and fast rule of how long you should have your mortgage for. The default is 25 years but times have changed and property prices are now nearly 10 times higher than when my parents purchased their property so mortgage terms have also changed to suit people's circumstances and the market as a whole. Just because someone takes out an initial mortgage for 30 or 40 years does not mean they cannot shave years off when they come to remortgage. Many of our clients do this as they usually purchase at the start of their careers and then, once they are earning more, they have more disposable income which allows them to live and also make a higher monthly payment. This saves them thousands by reducing the mortgage term. Before their last tango, everyone wants to be mortgage-free. It's why I always suggest anyone with a mortgage should seek professional advice from an advisor who can look at mortgages from the whole market as it could save them thousands in the long term."
"Your mortgage term shouldn't be decided by a default term that is offered to everyone. People should have the appropriate term for their situation. I had a couple once, who initially had a 30-year term mortgage and two years later we remortgaged. They had both had pay rises and had been overpaying their mortgage and we brought it down to 22 years as they felt they could afford it. They just wanted the mortgage gone before the last tango in their careers so they could move on to enjoying retirement."
"The mortgage term ultimately depends on the borrower's circumstances. But for many younger people, making payments more affordable by taking out a 35 or 40 year mortgage term, fixed at a low rate for 10 or even 15 years, could be a good choice, particularly as most mortgages allow borrowers to overpay 10% of the outstanding balance each year."
"The term has a significant impact on the amount of interest you pay over the course of the mortgage so it is important to discuss what the objectives are before agreeing on this. If the objective is to have the most cost-effective repayment plan then the term should be as low as possible and in line with what is an affordable monthly payment. If the objective is to keep the repayments as low as possible to give you an extra surplus of income then a longer term may be suitable."
"You should take the shortest term that gives you a comfortable monthly mortgage commitment, is the simple answer. Too long and you have a low mortgage payment, but pay a fortune in extra interest. Too short and you have no free cash and can't live your life. As with most of life's big decision's it's all about getting the balance right. "The important bit is this: everyone is different. Just because your mate's mortgage is over 30 years, or your parents' first mortgage was over 25, doesn't mean they're right for you. The right mortgage term for you could be 17 years, or 39 years depending on your own unique personal circumstances. "Whatever term is right for you, when you first buy your house is not set in stone either. You should regularly review your mortgage and you can amend the term, up or down, as is needed for your situation at that time. Speak to a professional mortgage adviser who can help you with all of this, explaining the various different options and helping you to make sense of it all."
"The term of your mortgage should be based on what is affordable to you and what your goals are. If your objective is to clear the mortgage as quickly as possible then you will want the shortest term possible without making the monthly payments too high. If your objective is to pay the least you can each month then you will want the longest term possible. Whereas, historically, everyone seemed to have a 25-year mortgage, we now see our clients' terms ranging from five years to 40 years. The term that you select at the outset can be changed and usually we will review this when we come to remortgage. Often as clients get older they want to have one last tango and remortgage for the final time to clear their mortgage. With regards to an Interest-Only mortgage, we would normally recommend as long a term as the lender allows, to give you as much time as possible to repay the lump sum."
"Potential borrowers can save £000's in future mortgage interest by having a shorter mortgage term. However, the most important thing is having a mortgage payment that is affordable and sustainable today. With the rampaging increase in house prices month-on-month, the days of the 25-year mortgage are long dead and gone. Today, most lenders will consider a mortgage term of up to 40 years to assist prospective house buyers' affordability. Just like other aspects of a mortgage, the term should be regularly reviewed and can be adjusted in line with future plans, increases in earnings and other life events."
"There's no such thing as a one-size-fits-all mortgage term and the 25-year 'standard term' should be consigned to history. Borrower age, affordability, goals, attitude to risk, income profile, other assets and equity are just some of the factors that should be taken into account when deciding on the right term for a mortgage."
Star Quote
"A mortgage term can be anywhere from five to 35 or even 40 years now depending on the lender. Contrary to popular belief, it doesn’t have to be in 5-year blocks and can even be an odd number of years. But the shorter it is the better. We always try to get the lowest mortgage term that is realistically affordable for our clients, as what they can save in interest over the term of the mortgage by paying it off quicker is quite substantial. For most people, a 25- or 35-year mortgage term is generally the most practical option."