Mortgages Are For Life The 52 Year Mortgage Is Here

Mortgages Are For Life - the​ 52 Year Mortgage is​ Here
The old days of​ mortgages lasting for 25 years are on​ their way out as​ lenders react to​ rising house prices and the​ squeeze on​ borrowers.
Until recently you​ had no choice about how long you​ had a​ mortgage for .​
You paid it​ back in​ 25 years or​ else .​
However our research shows the​ market has changed dramatically.
Now more than a​ third of​ mortgage lenders will offer terms of​ 40 years or​ more .​
Some will even lend for as​ long as​ 52 years .​
Put simply the​ longer you​ take to​ pay off your mortgage the​ less you​ will pay each month .​
But it's not quite that simple.
You need to​ pay it​ off sometime
At the​ most basic level,​ mortgages fall into two categories: repayment and interest-only .​
With a​ repayment mortgage,​ you​ pay off your mortgage bit by bit every month.
With an​ interest-only mortgage,​ the​ borrower only pays the​ interest,​ but usually with a​ view to​ paying off the​ original amount borrowed at​ the​ end of​ the​ mortgage term .​
If you​ are only paying interest then that cuts the​ amount you​ pay each month.
Of course you​ also need some way to​ pay off the​ debt .​
That means having a​ savings plan in​ place,​ such as​ an​ investment ISA,​ or​ a​ pension scheme.
The problem with the​ pension option is​ that you​ have to​ wait until you​ retire until you​ can claim your tax-free lump-sum to​ pay off your mortgage .​
But the​ advantage of​ both ISA and pension options is​ that the​ tax breaks you​ receive help you​ repay your mortgage.
The earlier the​ better
These days,​ most lenders allow you​ to​ make lump-sum payments to​ reduce your mortgage .​
This can be limited to​ a​ certain proportion of​ the​ debt,​ such as​ 10% per annum .​
This applies to​ both interest-only and repayment deals .​
Some mortgages allow you​ to​ pay off as​ much as​ you​ want.
If you​ have a​ repayment mortgage you​ can also significantly reduce the​ amount of​ interest you​ pay by many thousands of​ pounds by opting for an​ early repayment scheme.
This will mean that you​ monthly payments will be higher than you​ currently pay but will save you​ thousands of​ pounds in​ interest payments by reducing the​ term of​ a​ mortgage from 25 years to​ say 20,​ 15 or​ even 10 years,​ for example .​
If you​ can afford the​ higher repayments,​ it​ is​ a​ very attractive option.
The two year mortgage merry-go-round
It is​ now quite rare,​ and often inadvisable,​ to​ stick with one company for the​ length of​ your mortgage.
While a​ mortgage might nominally be for 25 or​ 40 or​ even 52 years,​ the​ fact is​ that you​ should be looking to​ re-mortgage every few years.
There are always good deals coming onto the​ market and it​ is​ unlikely that your mortgage will always be the​ best deal for you,​ even if​ that was the​ case when you​ first took it​ out.
Reducing your interest repayments might also leave more money available to​ pay off more of​ your mortgage debt.
The basic point is​ that if​ you​ take out a​ 40-year mortgage your repayments could be around £100 a​ month lower than for a​ 25-year mortgage .​
If after five or​ 10 years you​ can afford to​ pay more you​ can make lump sums payments or​ even cut the​ length of​ the​ mortgage.
The danger though is​ that the​ longer you​ take to​ repay your mortgage the​ more it​ costs in​ interest.
On a​ £100,​000 mortgage at​ 6 per cent you'd pay £93,​200 in​ interest over 25 years .​
Over 40 years you'd pay £164,​100 in​ interest .​
That's a​ £70,​000 difference .​
And remember you​ might not want to​ be working well into your 60s or​ even 70s to​ keep up payments on​ your mortgage.
When does it​ end?
In theory,​ you​ could keep re-mortgaging,​ although in​ practice,​ lenders will be unlikely to​ allow you​ to​ have a​ mortgage past retirement .​
They will look at​ your circumstances and set a​ limit to​ when they expect the​ mortgage debt to​ be paid off.
What Next?
First,​ use our calculator to​ find the​ best mortgage interest rate for your circumstances .​
Then complete our simple online form to​ arrange for Mortgage Advice from a​ Qualified Mortgage Adviser.

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