Long-term mortgages are attractive due to their lower monthly payments. However, the total interest paid over the duration of the loan can amount to a staggering.

Given the increasing cost of living, many homeowners and prospective buyers are considering 35 to 40-year mortgages to lower their monthly payments. In the past year, there has been a 10% increase in mortgage applicants opting for 40-year mortgage terms.

Since property prices are rising faster than salaries, shorter mortgage terms have become less attainable for many first-time buyers. Currently, 67% of all mortgages on the market offer terms up to 40 years. However, experts from Uswitch caution buyers to tread carefully when considering these so-called ‘mammoth mortgages’.

What is the additional interest paid on a 35-year mortgage?

Consider a £250,000 mortgage (the average UK property price), with a 25% deposit. The following illustrates the interest paid over a 35-year term, assuming a fixed-rate mortgage that reverts to 4% after 4 years.

Interest payments on 35-year mortgages:

For a 6% mortgage rate over a 35-year term, you'd end up paying £179,000 in interest, which is an additional £53,000 than a similar 25-year term. Similarly, for 5% and 4% mortgage rates, you would be paying £52,000 more in interest over 35 years than if you chose a 25-year term.

What is the additional interest paid on a 40-year mortgage?

Consider a 40-year mortgage for £250,000 with a 25% deposit. The following illustrates the interest paid over a 40-year term, assuming a fixed-rate mortgage that reverts to 4% after 4 years.

Interest payments on 40-year mortgages:

For a 6% mortgage rate over a 40-year term, you'd end up paying £206,000 in interest, which is an additional £80,000 than a similar 25-year term. Similarly, for 5% and 4% mortgage rates, you'd be paying £80,000 more in interest over 40 years than if you chose a 25-year term.

What are the benefits of a longer mortgage term?

Despite the substantial differences in interest payments, under certain circumstances, opting for a longer mortgage term could prove beneficial.

• Higher chance of meeting lender's affordability criteria due to lower monthly payments.
• The opportunity to borrow more and reduce the size of the required deposit.
• An appealing option for those expecting an inheritance that can be used to pay off the mortgage later.
• Suitable for individuals expecting significant income growth in their careers.
• A lower monthly payment allows for more disposable income.

Why are longer-term mortgages gaining popularity?

According to the Office for National Statistics (ONS), while earnings have doubled since 1997, house prices have grown 4.5 times. For first-time buyers, this often translates to needing to borrow a large amount compared to their annual income. As lenders usually offer loans up to 4.5 times annual income, this leads to a significant gap.

To summarise:

• The trend towards 30-35 year mortgages is on the rise, with 38% of all mortgage applicants choosing this option, and 67% of all mortgages on the market offering up to 40-year terms.
• Despite lower monthly payments, long-term mortgages result in significantly higher interest charges.
• For instance, a 6% mortgage on a £250,000 property over 40 years could lead to a total interest cost of £206,000.
• This same mortgage over 25 years would cost £80,000 less in interest.

Everyone’s circumstances are different, and with this in mind, we would recommend you to speak to your bank or a mortgage broker who will be able to assist you depending on your circumstances.

This blog is not to be construed as advice and it’s only for information purposes only.