August 11th, 2017
The age of borrowers is on the increase. In fact, studies have shown that over one-third of mortgages taken out this year won’t be fully repaid until after the borrower turns 65.*
Traditionally, the standard mortgage repayment term has been set at 25 years, however many lenders are now setting their maximum term length at 40 years.
But what has caused this rise in the age of borrowers?
One reason is affordability. With house prices on the increase, extending the length of the mortgage allows borrowers to reduce their monthly payments to a more affordable level.
Over recent years, securing a mortgage has become harder, thanks to the introduction of regulations that require lenders to stress test borrowers. This is designed to assess their ability to make mortgage repayments and an interest rate is applied to the mortgage rate offered with their loan.
However, whilst longer terms can offer a number of benefits, it’s worth noting that they will cost more in total, as lengthier loans incur higher total interest charges.
In addition to this, the longer a term goes on, the more chance there is of unexpected circumstances, such as illness, preventing a borrower from being able to repay their loan.
The increase in house prices also means that many people are saving for a lot longer in order to afford their dream property, in turn increasing the age of buyers. However, it’s important to remember that a mortgage could actually save you money in the long run, in comparison to rent prices, so is it actually better to get onto the property ladder and continue to save towards your dream home?
Some borrowers prefer to make lower monthly payments with the view to working longer or overpaying, whilst others prefer it commit to higher repayments with a view to paying off the mortgage faster. It’s about considering personal circumstances and balancing speed of repayment with affordable repayment.
If you’re a contractor, independent professional, or freelancer considering a longer-term mortgage, it’s always advisable to speak with an experienced mortgage adviser who will assess your individual circumstances and review the options available to you.
*https://www.ft.com/content/7711f8c8-7205-11e7-93ff-99f383b09ff9
Media Contact: Sarah Middleton, Public Relations Manager
Tel: 01489 555 080
Email: media@contractormortgagesuk.com