With mortgage rates increasing rapidly and house prices remaining on average considerably higher than they were even at the start of the year, financial experts have been looking at longer-term mortgages as a potential solution. Here are the pros and cons.
According to Rightmove, the average house price has fallen for the first time this year by 1.3 per cent.
However, this still means that the average house still costs more than £365,000 and with bank rates increasing as well as other costs increasing at the same time, it can be increasingly difficult for potential buyers to find a mortgage broker that will lend to them on favourable terms.
Alongside removing certain safeguards introduced after the 2008 financial crisis, some experts have claimed that allowing for much longer mortgage terms than the typical average of 30 years would enable borrowers to get the house they want without impossibly high repayment rates.
Whilst it can be tempting to consider a longer mortgage, here are some of the pros and cons of most long-term mortgage deals.
Con: You Pay More In The End
Ultimately, the longer you borrow for, the more interest you pay, which means that by the end of the mortgage period you could have paid tens of thousands of pounds more than you would expect.
Pro: Lower Monthly Repayments
The biggest advantage is that your monthly payments on the mortgage are significantly lower, which can help improve financial stability as well as your choice of houses on the market.
Con: Paying Until Retirement And Beyond
For many working people, the mortgage is the last big payment that needs to be made before they are comfortable enough to retire. A longer-term mortgage pushes back this final date of financial freedom, and, if some proposals come to pass, pushes the financial cost onto your children.
Pro: Greater Flexibility
Once you are on the property ladder it is much easier to renegotiate terms, overpay or remortgage at favourable rates, meaning that the long-term mortgage may not be forever if your situation improves.
