What is the longest mortgage term UK?
When it comes to mortgages, there are several aspects to consider, one of which is the overall duration. Certain limits may apply when it comes to your mortgage term. Therefore, we’ve compiled a list of important topics to aid you along the road.
Longest mortgage terms UK
A mortgage term is the lifespan of your mortgage; it’s how long you must make repayments to your lender until your mortgage has been paid off, or if you have an interest-only mortgage until you have finished paying interest on the original loan.
The most common mortgage term is 25 years, and the majority of lenders will stretch to 35 years. Some mortgage lenders will allow you to extend your mortgage to 40 years.
There is the possibility that a 50-year mortgage term will soon be available as Perenna, a digital lender, has recently been granted a licence by the Bank of England. Interestingly, the 50-year mortgage term would be fixed for life, which means the borrower’s interest rate would be locked in for the full mortgage term rather than the typical two or five years. While this mortgage is not yet available to customers, it could be soon.
When it comes to more specialised loans, such as equity release and retirement interest-only (RIO), mortgage lenders rarely set a maximum duration.
How does your mortgage term change as you become older?
While a lender may indicate that a mortgage may be put up for 35 or even 40 years, age will still play a key role in this. A lender must be satisfied that the mortgage will be manageable during its term. Therefore, any retirement plans, and the influence this may have on your income, must be considered.
Many people retire between the ages of 65 and 70, and many lenders base their lending decisions on this standard. Most lenders will accept a mortgage that will expire before an applicant’s 70th birthday if the applicant’s anticipated retirement age is 69. As a result, the highest age permissible is often 70, and if you are 45 years old at the time of application, the maximum period many lenders would allow is 24 years.
Some lenders may lend to people above the age of 70 if certain conditions are met. Some examples include:
- Later planned retirement age: This must be achievable in the eyes of the lender; for example, a manual labourer suggesting that they would retire at the age of 85 is unlikely to be accepted.
- Evidence of pension contributions: Lenders may authorise a longer term if they are satisfied that you will have appropriate pension plans in place upon retirement or if you are contributing to a pension.
- Retired already: If you are already retired, you are most certainly receiving some form of income, such as a pension.
- Affordability is not dependent on income: Some lenders will overlook an applicant’s age when determining the maximum term allowed if their income is not considered to determine the loan’s affordability.
Extending a mortgage term
Life throws us many hurdles, and there may come a moment when you need to consider extending the term of your mortgage. Changes such as establishing a family may have an impact in two ways: the additional expense of your new addition, or additions, to the family, and for some, a decrease in income due to a change in working hours or patterns. Lenders are happy with a request for an extension as long as it meets their requirements for how long you now want to take the term. This might be accomplished through a request to your present lender or by a fresh application to an alternate lender for a remortgage. Following any increase, we urge that you continue to monitor your mortgage term throughout its duration with the goal of decreasing it again in the future if possible.
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How long may a buy-to-let mortgage be for?
Buy-to-let mortgages are treated differently from residential mortgages, primarily because the property is an investment opportunity rather than a personal residence. As a result, a lender will look primarily at the rentable worth of the property to meet the interest due rather than your own income from sources such as work or self-employment. With this in mind, some lenders are significantly more liberal in terms of the period they will allow or, more specifically, the age they will allow a mortgage to continue until. While the lender may still have a maximum term of 35 years, for example, age is now much less important. Retirement dates are no longer as relevant, with some lenders indicating no maximum age at all on expiry.
What can a mortgage broker do to help you with your mortgage term?
A mortgage broker may outline the benefits and drawbacks of a longer or shorter mortgage term using their experience and knowledge. Some of the long-term benefits and drawbacks are as follows:
- A capital and interest mortgage have a lower monthly payment.
- A better probability of meeting a lender’s affordability assessment.
- Greater financial freedom if you choose to overpay.
- There is less possibility of becoming financially squeezed in the future.
- If interest rates rise, you’ll be better prepared financially.
- Overall, a greater amount of interest will be paid.
- This might have an influence on your retirement planning.
- You may have a narrower pool of lenders to choose from.
- Any necessary insurance may be more costly.
- It is possible that funds will be spent elsewhere that are less useful to you.
Your mortgage broker will go through all the relevant information with you to ensure you secure a mortgage term that is right for you. They will ideally also guarantee that you evaluate this together with other components of your mortgage, such as the interest rate, on a regular basis over its duration.