Mortgages
Gary Goodwin
A fact which not many people know is that the word ‘mortgage’ comes from the Old French term mort gage, which literally means “dead pledge”.
This does not mean, as some have suggested, that you will be paying off the debt for your house loan until you pass away, but actually refers to the debt ‘dying’ when you pay it off in full or your right to the property dying if you default on the loan.
However, with the rise of so-called ‘marathon mortgages’, you could be forgiven for thinking that a property loan could take a lifetime to pay off.
A marathon mortgage is generally a home loan lasting 35 years or longer. Some mortgages are now available on the market that last 40 years.
A combination of rising house prices, high interest rates and wages failing to keep pace with those increases has made mortgages lasting 35 years or longer more popular.
In many instances, these mortgages now last beyond the current State pension age.
Last year, more than 34,000 borrowers aged 36-plus took out mortgages with terms of at least 35 years – more than three times the number of people in the same bracket took out the same loans in 2021, according to data from the Financial Conduct Authority (FCA).
There are advantages to taking out a mortgage over a longer period of time.
Affordability is one of the key drivers – a longer mortgage reduces the monthly repayment, making them more affordable for home buyers.
Taking the average price of a home in the UK at £271,295, according to the Land Registry, the monthly repayment for a 25-year mortgage for that amount, assuming a 10% deposit of £27,000, would be £1,524 at the current average two-year fixed interest rate of 5.63%.
For a 35-year mortgage, this monthly cost would drop to £1,337 and across a 40-year term, it would be just £1,263.
However, while spreading the cost out over a longer time makes for more affordable monthly payments, it also increases the final amount paid.
This is because interest is accrued across the whole term of the mortgage, so the longer the term, the higher the total amount.
Borrowing £244,925 over 25 years will see you repay £457,200; over 35 years it’s £561,500 and over 40 years it would be £606,200.
The impact of all that extra interest can be seen in the table below:
| Term | Monthly repayment | Total repaid | Total interest |
| 25 years | £1,524 | £457,200 | £212,300 |
| 35 years | £1,337 | £561,500 | £316,600 |
| 40 years | £1,263 | £606,200 | £361,300 |
Another disadvantage to a marathon mortgage is that you could end up still repaying it after you have retired.
This could mean either using pension savings to clear your mortgage or having to fund mortgage interest years into your retirement – either way, this will cut into your retirement savings or mean you need to work for longer than you ideally would like to.
The cost of protecting yourself financially is more expensive, the longer the term. This could lead to being under-covered or having less disposable income to fund your desired lifestyle.
Taking expert advice can help you to manage your mortgage so that repayments suit your circumstances over the years.
For example, when you are starting out as a property owner and finances are tight, a mortgage adviser can help you secure a longer term loan so that repayments are more manageable.
An adviser can steer you on the right path when it comes to things like monthly overpayments to reduce your interest and cut your mortgage term.
Your adviser can also assist you to review your budget if there is a change in your job or a promotion with a higher salary and make adjustments when financial commitments such as school fees stop.
And of course, an expert adviser can help source good deals when it comes to remortgaging so that you can cut down on the amount of interest paid and/or shorten the time your loan is outstanding.
While an adviser won’t turn a marathon into a sprint, they can help you to get mortgage payments down and to pay off the debt in a more timely fashion, if that is what works best for you and your financial goals.
For more information about mortgages of all kinds, marathon or otherwise, get in touch with one of our advisers today.
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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR OTHER LOAN SECURED AGAINST IT.
Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. A recommendation will be made only following a full assessment of your personal circumstances. Always seek professional advice before making financial decisions.
A marathon mortgage is generally a home loan lasting 35 years or longer. Extending the repayment period reduces monthly repayments but increases the total interest paid over the life of the loan.
A 35-year mortgage can improve affordability and help buyers get onto the property ladder. However, it usually means paying more interest overall and may result in repayments continuing into retirement.
Yes, subject to lender criteria and affordability checks. Many borrowers reduce their mortgage term by making overpayments, increasing monthly repayments after their income rises or remortgaging to a shorter term.
Yes. Although monthly repayments are lower, interest is charged for longer, meaning the total amount repaid is significantly higher than on a shorter mortgage.
Yes, although lenders may assess how you will afford repayments once you stop working. Entering retirement with an outstanding mortgage can reduce the income available for other retirement expenses.
If your lender allows penalty-free overpayments, paying extra towards your mortgage can reduce both the amount of interest you pay and the length of your mortgage term.
Potentially. If your financial circumstances improve, remortgaging to a shorter term may reduce the total interest paid while helping you become mortgage-free sooner.
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Mortgages
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