Getting a long-term mortgage can reduce your monthly payments but you pay more in interest
Is the mortgage market turbulence getting you down? Have you got a mortgage-related question you need answering? Email in, and we will get one of our experts to reply. Nick Mendes, mortgage technical manager at John Charcol, has given his advice to a reader below. If you have a question for our experts, email us at money@theipaper.com.
Question: I can’t decide whether to go for a longer mortgage term, like 35 years, and try to overpay when I can, or pick a shorter term with higher repayments from the start. What’s the best option if I expect my salary to increase over the next few years?
Answer: This is a really common dilemma for anyone taking out a mortgage, whether you are buying your first home or moving up the ladder. It is a very sensible question to ask because the decision you make now can have a big impact – not only on your monthly payments but also on how much interest you end up paying over the life of the mortgage.
Let’s take a typical example, someone buying a £400,000 property with the expectation that their income will rise over the coming years. On the face of it, choosing a 35-year mortgage term can feel quite appealing.
The main advantage is that it keeps monthly repayments lower, making things more affordable in the short term. It also gives you some breathing space if something unexpected happens or your circumstances change. You are not tied into the higher monthly payments that a shorter term would require.
But the trade-off is the total cost. The longer the mortgage term, the more interest you end up paying overall. Even at the same interest rate, stretching repayments over 35 years compared with, say, 25 years means paying significantly more in the long run.
For example, if you borrow £350,000 after a £50,000 deposit, with an interest rate of 4.80 per cent, monthly repayments over 35 years would be around £1,627. Over 25 years, they rise to about £2,006. The difference of roughly £379 a month is certainly noticeable.
But it is the total interest that really jumps out. Over 35 years, you would pay around £326,000 in interest, compared with roughly £251,000 over 25 years. That is about £75,000 saved simply by choosing the shorter term.
That said, higher monthly payments are a serious commitment, especially if you have other financial goals or want the flexibility to navigate changing circumstances.
This is why some people prefer to opt for the longer term with the intention of overpaying whenever possible. Most mortgage lenders will allow you to overpay by up to 10 per cent of the outstanding balance each year without penalty, which is particularly common on fixed-rate deals.
If your income does grow as expected, you can use those extra funds to make regular overpayments. Doing so reduces the mortgage balance more quickly and cuts down both the term and the total interest, without locking you into higher payments from the start.
It is a strategy that works well for many, but it does rely on discipline. If you do not follow through with overpayments – and life can get expensive – you will simply continue paying the minimum, potentially stretching the mortgage over the full 35 years and paying far more in interest.
The good news is that the choice you make now is not necessarily set in stone for the entire term. As your income grows or your financial situation improves, you can often speak to your lender about reducing the mortgage term.
Alternatively, when your fixed-rate deal ends, you have the option to remortgage to a shorter term or change your repayment strategy to suit your new circumstances. This flexibility can be reassuring, particularly if you do not want to overcommit too early.
Some buyers may also choose a compromise by opting for a 30-year term, for instance, which keeps payments manageable while avoiding the highest long-term interest costs.
There is no one-size-fits-all answer. It really depends on how comfortable you are with your current payments, how confident you are in your future earnings, and whether you prefer the flexibility of paying more when you choose, or the discipline of having it baked into your monthly payments. What matters most is that the decision works for both your current financial circumstances and where you see yourself in the years ahead.
