Not so very many years ago, if you took out a mortgage, chances are it was for 25 years.

Who knows why that figure was first chosen, but 25 years was “the norm”.

Now, all that has changed and in the last decade or so, mortgage periods have grown and it has become common to see 30-year 35-year and 40-year loans.

Indeed, the Government’s English Housing Survey, released in January, revealed that 52 per cent of first-time buyers had a mortgage of 30 years or more.

In part this increase was inevitable as house prices rise and lenders have to be sure that their customers can afford the monthly repayments – the longer the mortgage, the lower the monthly cost.

The upshot of that of course is that the loan will ultimately cost more… a lot more.

The total extra cost of a £300,000 mortgage, with an interest rate of 2.5 per cent over 30 years, rather than 25 years, is almost £23,000.

But if you’re a savvy house-buyer – and I’m here to make sure you are – such a long-haul mortgage might not be the albatross round your neck you fear.

The trick is to take out your 30, 35 or even 40-year mortgage on a low, fixed rate for, say, two, three or five years and then look at your options again.

For a start you will hopefully have proved you can keep up the payments, will therefore have paid off some of the loan and with luck your property will have grown in value.

All of these things working together will hopefully put you in a position to negotiate a mortgage over a shorter team and/or with a reduced rate.

Let me show you an example:

 

A client, let’s call him Mr Deal, took out a 35-year mortgage on a two-year fixed rate. At the end of his fixed term we met to review his mortgage. He had paid off some of his loan and the value of his property had risen. So we were able to renegotiate and reduce his mortgage term by nine years, to a 24-year mortgage, at a slightly better rate. After another two-year fixed rate Mr Deal came back to see me again and we were able to negotiate him another reduction, this time taking a further six years off his mortgage. So now he has a 16-year mortgage (he started out with 35 years) which will save him thousands in the long run and he has monthly payments he can afford.

 

Of course, every case is different and depends on individual circumstances. But a 30, 35 or 40-year mortgage doesn’t have to be the lengthy sentence it first appears to be. And with interest rates still low, it is still a great time to be climbing on the property ladder.

Looking to get a mortgage or review your existing loan? Please give me a call on 07767 692653. We can look at mortgage products from the whole of the market to find the perfect loan for you.