Mortgages historically had a standard maximum term of 25 years, but due to recent reports homeowners are paying their mortgage well into their 70s.
Some 51% of mortgage deals available on the market have a standard maximum mortgage term of up to 40 years.
Why mortgage duration getting longer?
Mortgages are getting longer due to recent stricter affordability rules and not to mention the sharp rise in house prices.
By choosing longer terms homeowners can afford to take out bigger loans, although they will be more expensive in the long term as more interest will be paid.
This means that homeowners will be in their 70s or even 80s before their mortgage is paid off.
6 out of 10 mortgages are now on deals longer than 25 years .
Since first time buyers are now in their 30s and in the wake of higher houses prices this trend is going to continue and become the norm.
If you have a mortgage of £150,000 (Mortgage rate of 4% ) over 40 years against a 25-year term it will cost you more than £63,398 in additional interest. Yes, your monthly payments will be less (approximately £70) however you will end up paying £300,916 over the term.
Lets crunch some numbers:
Mortgage rate 4% for life of mortgage.
Over 25 years: monthly repayments £792.00
Total Payback: £237,572
Over 30 years: monthly repayments £716.00
Over 40 years: monthly repayments £627.00
Total Payback: £300,916
Total Payback: £257,804