The maximum mortgage term you can get in the UK is 40 years.
A longer mortgage term means lower monthly repayments relative to the amount you’re borrowing, but it does also mean that you repay more money in total.
It also means a far longer commitment, so a 40-year mortgage isn’t suitable for everyone.
Here you can find out more about the pros and cons of having a very long mortgage term.
What is an extended mortgage?
An extended mortgage is considered to be any mortgage that is repaid over a period longer than 25 years. In the UK, 25 years is usually the maximum length of a mortgage term, so anything longer than this counts as extended.
There are now many lenders who offer mortgages longer than 25 years, with the longest readily available being 40 years. As of March 2020, lenders of 40-year mortgages include Halifax, Nationwide, Leeds Building Society and Yorkshire Building Society.
What’s the difference between mortgage term and mortgage deal?
Remember that mortgage term and mortgage deal are two different things.
The overall mortgage term is the total length of time you will take to repay your loan (assuming you don’t make overpayments).
The mortgage deal, on the other hand, is the period of fixed or favourable interest rates at the start of your mortgage term, which may last up to 10 or 15 years, but is more usually between two and five years.
When you remortgage, you may or may not extend your mortgage term.
For example, if you start on a 25 year mortgage and remortgage five years later, you might switch to a 20 year mortgage term.
Alternatively, you might take out another 25 year mortgage in order to get lower monthly repayments (but you would then spend an extra five years paying off the loan, so would in effect have a 30-year mortgage).
The pros and cons of an extended mortgage
Extended or very long-term mortgages aren’t right for everyone.
Here are some of the pros and cons.
- Your monthly repayments will be smaller
This is because you’ll be spreading the repayments over a longer period of time.
For example, let’s say you’re a first-time buyer with a £180,000 mortgage at 2 per cent interest. Monthly repayments on a 25 year term would be £763, compared to £545 with a 40 year term.
- Affordability may be better
When you apply for a mortgage, the lender must assess how much you can afford to borrow, and how well you will be able to maintain your monthly repayments. They also need to ensure that you could afford to pay if interest rates were to rise.
Because monthly repayments are smaller with a longer term, it can be easier to pass these affordability tests, especially for first-time buyers. However, this isn’t always true (e.g. if the term takes you over state retirement age, or if the source of your income isn’t considered to be reliable over that length of time).
- You’ll pay more interest overall
Quite simply, an extended mortgage is more expensive in total, even though your individual repayments may be lower. This means you should weigh up that factor carefully before taking out a long mortgage.
For instance, in the example above, with a 25 year term you’d pay just under £49,000 in interest. With a 40 year term you’d pay almost £82,000 in interest, a whopping £33,000 more.
- You’re in debt for longer
Bear in mind also that with a 40-year mortgage it will be 40 years before you own your home outright. For perspective, this means that if you were to take out your mortgage aged 25 (very young for a first time buyer), you would not have paid off the mortgage until you are 65 (the current state pension age). This is quite a commitment to take on when you are so young, as a great deal can change in 40 years.
How should I choose the length of my mortgage term?
When applying for your mortgage, the length of the term will be one of your key considerations.
It’s best to talk to an independent mortgage broker (or an IFA who specialises in mortgages) about the right term for you.
Your adviser will take into account all your circumstances, not just the mortgage’s immediate affordability, and may suggest alternative ways to reduce your monthly repayments rather than simply extending the mortgage.
Can I lengthen the term on my existing mortgage?
Lenders will generally let you apply to extend your mortgage term, but they will need to run some checks on you before extending it.
Note that lenders will also have a maximum age limit – that is, if you’ll be so old by the end of the mortgage term that you might not be earning, you may not be able to extend.
Naturally, the lender will want to be reasonably sure that you will afford the monthly repayments for the entire length of the loan.
Can I shorten an extended mortgage once I’ve taken it out?
Another option is to take out an extended mortgage initially, only to shorten it later on by remortgaging. In many ways this can be seen as an attractive option. Your personal circumstances may improve over time; you may start to earn more, you may inherit money, and the same may apply to your partner. This could enable you to afford higher monthly repayments.
Based on this scenario, you could initially purchase a home by taking out an extended mortgage, and then look to shorten the terms of that mortgage at your earliest opportunity, by remortgaging to a shorter term.
Talk to your mortgage broker about this strategy.