How Long Is Mortgage? Mortgage Terms Explained

Ever wondered about the length of mortgages? If so, you may have typed ‘how long is mortgage?’ into your search engine a few times. The most common length of a mortgage is 15 years or 30 years, but you can also find mortgages with 10-year, 20-year, 25-year, or 40-year terms. A mortgage term is the length of time that you have agreed to pay back the mortgage lender the funds borrowed, plus the interest due when buying a property. The length of a mortgage repayment term varies between purchasers and depends on the amount of money borrowed and how much they can afford to repay each month. 

The shorter the term of your mortgage, the higher your monthly payments will be, but the less you’ll ultimately pay in interest. The longer the term of your mortgage, the lower your monthly payments will be, but the more you’ll ultimately pay in interest. 

More About Mortgage Terms

When you are buying a home, one of the biggest decisions you will make is how to finance it. If you don’t have enough cash in the bank to cover the full price of the property (and not many people do with house prices consistently rising at the rate they are), then one of the options available to you is to apply for a mortgage loan.

If you decide to get a mortgage, you’ll need to establish is how long it will take you to pay it off. You can calculate this by reviewing the mortgage amount borrowed and the repayments needed to pay it off. These factors will be impacted by the property price, any existing debts and living costs that you have, and your income.

This article will cover mortgage length in more detail so that you can make an informed decision when it comes to finding the right mortgage term for you based on the finances you currently have available and your financial goals for the future.

What Is A Mortgage?

A mortgage is a long-term loan from a bank or building society used to fund the purchase of a property. Mortgage loans can be either a secured loans or unsecured lending, but most mortgages are secured against the property being purchased. This means that if you fail to repay the full amount owed, your home may be repossessed by the lender. As a long-term loan, repayments are usually made over 15 to 30 years, but shorter and longer terms are available.

To get a mortgage, you will need to demonstrate to your lender that you can afford the repayments. This will usually involve an assessment of your annual income and set monthly outgoings, such as utility bills and credit commitments. Mortgage lenders will also look at your credit history when considering your application. If you have had previous problems with debt, this could make it more difficult to get a mortgage.

You can apply for a mortgage from a bank or building society, or through a broker. Mortgage brokers are regulated by the Financial Conduct Authority (FCA) and must give you impartial advice on which mortgage product is right for you.

Most Common Mortgage Lengths

The two most common mortgage lengths are 15 years and 30 years. A 15-year mortgage deal will have a higher monthly repayment amount than a 30-year mortgage, but you will pay less in interest over the life of the loan. The reason for this is that with a shorter-term loan, you’re paying off the principal amount that you borrowed faster than with a longer-term loan. This means that there is less time for interest to accrue.

A 30-year mortgage will have lower monthly repayments than a 15-year mortgage, but you will pay more in interest over the life of the loan. The reason for this is that with a longer-term loan, you’re paying off the principal amount borrowed, plus interest, over a longer period. This gives the interest owed more time to accrue.

You can also get 10-year, 20-year, 25-year, and 40-year mortgages. A 40-year mortgage is the longest term available and has the lowest monthly repayment amounts, but you will pay more in interest over the life of the loan than with any other type of mortgage.

To qualify for the shortest loan terms, you must have a good credit history and credit rating, and meet strict lender affordability checks to show that you are a reliable borrower.

How To Choose The Right Mortgage Length

There are several factors to consider when deciding how many years it will take you to repay your mortgage.

The first is the current interest rate. If rates are low, you may want to consider a longer loan so you can lock in a low rate for the life of the loan. On the other hand, if rates are high, you may want to go with a shorter loan so you can refinance when rates drop.

You should also think about your financial goals. Are you planning on staying in your house for a long time, or do you think you’ll move in a few years? If you think you’ll move soon, a shorter loan may be the better option. That way, you won’t have as much interest to pay when you sell the house. However, if you plan on staying put for a while, a longer loan could save you money in the long run by keeping your monthly payments lower.

Ultimately, the best way to choose the right mortgage length is to talk to a lender and figure out what makes the most sense for your specific situation. By taking the time to do some research and ask questions, you can be sure to find the best option for your needs.

What Impacts How Long A Mortgage Is?

Several factors can impact how long a mortgage is but the two primary considerations are the interest rate and the amount of deposit paid. The interest rate impacts how much is paid each month, and the deposit payment impacts the overall amount of the original loan.

  • A higher interest rate will result in a higher monthly payment, but a lower overall cost of the loan. A lower interest rate will result in a lower monthly payment, but a higher overall cost of the loan.
  • The deposit payment you make will be calculated as a percentage of the overall property value that you are purchasing. The lender uses this loan to value or LTV ratio, to decide which mortgage rates to offer you. Better rates are available to applicants with a larger deposit. A smaller deposit as a percentage of the property price will result in a longer loan term as there will be more debt to be repaid. If you have a large deposit, mortgage terms can be much shorter because there is less money to pay back, which means most people can do this in far less time.

Other things that impact the length of a mortgage are: 

  • The type of mortgage: The type of mortgage you choose will play a role in how long it lasts. For example, an adjustable-rate mortgage (ARM) has a term of 10, 15, 20, or 30 years, but the rate is only fixed for a certain number of those years (usually 5, 7, or 10), after which it can adjust annually.
  • The Bank of England base rate does not directly affect most mortgages, but it can have an indirect effect because it influences lenders’ overall costs of funding and their profit margins, which is reflected in the deals they offer customers. For some types of mortgages, such as tracker mortgages, the Bank rate has a direct effect on monthly payments as the interest paid will directly follow the base rate set.
  • Your credit score: If you have a good credit score, you may be able to qualify for a shorter mortgage term than those will a less favourable credit score.
  • Your income: Your income will impact how long your mortgage is because the more money you make, the easier it will be to afford a higher monthly payment.
  • Your debt-to-income ratio (DTI): Your DTI ratio is the percentage of your monthly income that goes towards debt payments, and it’s an important factor in determining how long your mortgage will be. A higher DTI ratio means that you’re using a larger portion of your income to make debt payments, which may mean that you can’t afford a higher monthly mortgage payment and will need a longer loan term.
  • Your employment situation: If you have a stable job with a good income, you may be able to qualify for a shorter mortgage term. However, if you’re self-employed or have a volatile income, you may need a longer mortgage term to qualify for a loan. This will depend on individual lenders and their qualifying criteria.

Is A Long Or Short Mortgage Best?

is long or short mortgage best

The reason that people choose shorter or longer-term mortgages is largely based on their financial goals and circumstances. Some people want to pay off their mortgage as quickly as possible so that they can own their home outright. Others are more concerned with having lower monthly payments so that they can free up money for other purposes, such as investing or saving for retirement.

The important thing is to figure out when deciding if a long or short mortgage is best for you is to consider what your financial goals are and then choose a mortgage length that will best help you to achieve them. 

With a shorter term, you’ll have a higher monthly payment but you’ll also pay less interest over the life of the loan. A longer-term will have a lower monthly payment, but you’ll pay more interest over time.

If you’re not sure what your goals are or what type of mortgage would be best for you, talking to a financial advisor, The Money Advice Service or a mortgage broker can help. They can help you figure out which mortgage length is best for you and estate agents are also usually able to introduce you to mortgage advisors that they work with to assist with any mortgage advice needed.

How Do Interest Rates Affect A Mortgage Term?

As well as the length of a mortgage, you should also consider the type of interest rate you’re comfortable with when selecting a mortgage product. Fixed-rate mortgages have interest payments that stay the same for the life of the loan. Adjustable-rate mortgages start with a fixed rate for a fixed period of years and then adjust annually based on market conditions. 

As a result, the interest charged may impact how long you want your mortgage term to be. For example, if you need to keep overall costs to a minimum but interest rates are high, then you would want to select a shorter term.

Fixed-rate mortgages have interest rates that remain the same throughout the life of the loan. This means that your monthly payments will never change, even if market interest rates rise. Adjustable-rate mortgages (ARMs) have interest rates that can fluctuate over time.

ARMs typically start with a lower interest rate than fixed-rate loans, but the rate can increase or decrease over the life of the loan depending on market conditions. Hybrid ARMs combine features of both fixed-rate and adjustable-rate loans, offering a low introductory rate that is fixed for a certain period before converting to an adjustable rate.

If you’re unhappy with your monthly cost or are concerned that your home may be repossessed due to not being able to pay the agreed amount, you should talk to your current lender to see if they have more competitive rates available. You may also be able to switch lenders to get a better deal.

Can You Change the Length Of Mortgage?

How Long Is Mortgage?

If your financial circumstances change during the time that you’re paying off a mortgage, it can prompt a need to change the length of your mortgage and you should discuss this with your current mortgage lender.

Whether you suddenly have more cash available and want to shorten the mortgage term, or if finances are tighter than they once were and you need to lower the monthly repayment amount by extending the mortgage, you can usually change the length of your mortgage with your existing lender by remortgaging.

There are a few ways to change the repayment term of your mortgage so that it is shorter or longer than the original term agreed. 

1) When remortgaging your property, you can either agree to a longer period of repayment or a shorter one. Remortgages can also be called a further advance or mortgage advance and it is a type of new loan or additional borrowing commonly used to pay for home improvements and school fees or raise funds for other debt repayments or large purchases. Be aware that further advances aren’t usually an option until any fixed interest periods have passed and you have built up significant equity in your home.

2) You can shorten the length of your mortgage by increasing your monthly repayment amount or making additional monthly payments to repay the mortgage early. Most lenders allow you to overpay on your agreed repayment amount up to a certain percentage of the total value of the loan each year, usually around 10%. You should check the rules on early repayment with the lender before agreeing to any length of mortgage.

3) When paying off your mortgage earlier than the agreed term, you may be subject to early repayment charges so financial planning is key when it comes to taking out and adjusting your debt repayments.

Summary

A mortgage is a loan that helps to finance a property purchase, and one of the most important decisions when taking out a mortgage is choosing the right length for your repayment term. As a mortgage holder, the repayment term is the amount of time you have to pay back your mortgage, and the length of a mortgage can have a big impact on the total cost of your loan. 

A shorter mortgage will typically have higher monthly payments, but it will also save the borrower money in interest over the life of the loan. A longer mortgage will have lower monthly payments, but it will ultimately cost more in interest. borrowers should consider their financial situation and goals carefully before choosing a mortgage term.

Ultimately, the best way to choose the right mortgage length is to speak with a qualified lending professional regulated by the financial conduct authority who can help you assess your unique financial situation.

This article is for general information only and is not intended to offer advice for your specific situation. You should always seek professional advice when taking out a mortgage. 

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