Mortgages Pay Back Over 40 Years

Mortgages Pay Back Over 40 Years



Mortgages .​
Pay Back Over 40 Years.
Mortgages are traditionally taken out over 25 years,​ 30 years at​ a​ push – but house prices have got so high that many would be homeowners have found themselves completely unable to​ get on​ the​ property ladder.
Mortgage lenders have found a​ solution – offer a​ mortgage over a​ longer term so borrowers can afford the​ repayments .​
The catch is​ – the​ borrower pays a​ lot more in​ the​ long run,​ and the​ lender’s profits increase exponentially!
However,​ for many,​ it​ is​ the​ only way they can afford to​ buy a​ house .​
One couple opted for a​ 35-year mortgage with Northern Rock .​
Mr a​ is​ 36 years old,​ so the​ mortgage won’t come to​ an​ end until he is​ past retirement age .​
However,​ he has an​ optimistic viewpoint,​ and believes that his working situation will improve in​ the​ meantime,​ therefore allowing them to​ pay the​ mortgage off far earlier .​
It’s a​ gamble,​ but most people can safely assume that their earnings will increase as​ their career progresses.
For example,​ a​ mortgage of​ £200,​000 over 25 years on​ a​ 2 year tracker mortgage (initial rate 4.79% rising to​ 6.5% standard variable) will cost £1,​140 a​ month for the​ first 2 years,​ £1,​329 from then on​ .​
Take that same mortgage over 40 years instead,​ and the​ monthly rate after the​ initial 2 years is​ £1,​157 – a​ total of​ £172 less a​ month,​ and around £2,​000 less a​ year .​
However,​ the​ total cost that you​ pay back is​ quite different .​
With the​ 25-year mortgage,​ you’ll pay £394,​241 in​ total .​
Over 40 years,​ you’ll pay £549,​931 – a​ difference of​ £150,​000 .​
You could buy another house with that!
It’s very important that people that opt for the​ longer term mortgage in​ order to​ get onto the​ property ladder do take steps to​ remortgage and shorten the​ term as​ soon as​ possible .​
Making frequent overpayments would also help considerably .​
The worst case scenario is​ that you​ enter your pension years,​ still having to​ pay off the​ mortgage .​
With the​ future of​ pensions also in​ an​ uncertain state,​ it’s definitely not a​ gamble worth taking lightly.
A spokesman from Mortgage Advice Bureau,​ Brian Murphy,​ says,​ Stretching a​ mortgage term to​ lower the​ payments is​ a​ risky business .​
We always advise clients to​ keep repayments to​ as​ short a​ term as​ possible,​ to​ enable them to​ free up money for pre-retirement investments.
As long as​ the​ borrower is​ savvy and is​ well aware of​ the​ risks,​ and has every intention of​ turning the​ situation around,​ then it’s not necessarily a​ bad thing .​
It’s the​ borrowers that do not have the​ financial sense to​ realise the​ risks that could fall foul.
At the​ moment,​ a​ number of​ lenders including Northern Rock and Cheltenham & Gloucester,​ go up to​ 35 years .​
HSBC,​ Halifax,​ Ulster Bank and Coventry Building Society offer 40 years mortgages .​
Bradford & Bingley have trumped the​ competition with a​ 45 year offering,​ however it​ is​ very much targeted at​ young professionals,​ accountants for example,​ whose salaries are guaranteed to​ increase substantially,​ at​ which point they can remortgage and make higher monthly repayments over a​ shorter term.
According to​ Northern Rock,​ the​ average lifespan of​ a​ mortgage product is​ between 3 and 5 years,​ so prospective borrowers take note – a​ mortgage isn’t for life .​
It’s until a​ better offer comes along,​ and as​ long as​ you​ keep your eyes open,​ you​ should always be able to​ find a​ better deal.
Before choosing to​ get a​ longer mortgage term,​ chat it​ through with a​ specialist broker .​
There are plenty of​ no-obligation brokers,​ available through the​ internet,​ that will be able to​ give you​ professional advice,​ and help you​ find the​ best deal at​ the​ same time!




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