The data, from broker Mojo Mortgages, indicates that extending a mortgage from 25 to 35 years can cost the average first-time buyer nearly £90,000 more. Its research was based on the current average mortgage rate for a two-year fix (75% LTV) at 5.44%, on an averagely-priced house, of £285,000.
“For a 25-year loan term, the total mortgage cost would be £391,200, which includes the principal amount and interest charges,” explained John Fraser-Tucker, the head of mortgages at Mojo. “However, if you extend the loan term to 35 years, the same house will cost an additional £87,180, bringing the total cost to £478,380.”
The broker suggests that, based on the average mortgage rate and house price, extending your term by one year could cost an additional £8,472, by two years an additional £17,040, and by five years, an additional £42,600, which is certainly sobering. There are regional variations too, reports Mojo.
The research highlights the importance of considering the long-term financial implications when choosing a mortgage term. A longer term could significantly impact future financial planning, including pension contributions and retirement lifestyle.
What do brokers advise their clients – longer or shorter mortgage terms?
So, what does the wider industry think of these findings? Is it wrong to go long?
