What Mortgage Term Should I Choose?

Traditionally mortgages lasted for 25 years, but nowadays, your mortgage term can be as long or short as your mortgage lender will allow and you can afford.

But there are reasons why 25 years became the accepted term

The problem with very long terms 

Although it may look cheaper to borrow over longer, this is an illusion as the following example shows

If you used a repayment mortgage (also known as a capital and interest mortgage) to borrow £100,000 over 25 years at an interest rate of 6 per cent, you would repay around £644 a month or £193,390 over the term.

The same loan taken over 40 years would cost just £550 a month, but because you would be paying interest on your borrowing for far longer, the total cost would be£264,100.

The problem with very short terms 

You can choose as short a term as your lender will permit. This will save you a significant amount of interest but you will have to find the cash to clear the loan far more quickly.

Taken over 15 years, the total cost of that £100,000 repayment mortgage falls to£151,893 but you will have to shell out almost £844 a month.

A word about remortgages 

If you’re remortgaging, you might be tempted to cut your monthly costs by reverting to a 25-year term.

But remember that this will raise the total cost of your loan.

So if you can afford it, take the new loan over the same term as remained on your old one or opt to cut it even further.

To work out what your preferred term will cost, use our calculator at How much will my mortgage cost me every month?

For more options, also have a look at How to pay off your mortgage early

You might also find it helpful to read

Should I choose repayment or interest-only?

Should I go for a fixed rate mortgage or a discount rate?

and What length of deal should I choose?