What is the best mortgage term?

When it comes to securing the right mortgage for you, one of the most critical decisions is choosing the appropriate mortgage term. Get it wrong and this could impact your financial planning for the long haul!

In the current higher interest rate environment, opting for a longer mortgage term is a strategy many have used to lower monthly payments, but this should be approached with careful consideration.

We explain what a mortgage term is, its impact on your finances, and how to choose the best length mortgage term for your unique situation.

What is a mortgage term?

A mortgage term is essentially the duration for which a borrower agrees to repay their mortgage over. Selected by the borrower when applying for a mortgage, the term length impacts monthly payments and the overall interest paid throughout your mortgage.

How long are mortgage terms?

Mortgage terms vary among lenders. Typically, a mortgage term under 20 years would be considered a shorter term, whereas anything over 30 years would typically be considered a long mortgage term.

Most lenders have a minimum term of 2 to 5 years. It is important to remember that mortgages are tools intended for the long haul. If you require finance for a very short term, then there are other finance products available.

In terms of maximum term lengths, this is a different and evolving story.

Increasing a mortgage term has recently acted as a support measure to handle the higher interest rate environment and ease monthly mortgage payments. We have seen first-time buyers use longer mortgage terms as a way to help them get onto the housing ladder.

Recently, more lenders have increased their maximum mortgage terms to respond to this changing demand. In the past, a 25-year mortgage term was considered standard however now more borrowers are considering a 40-year mortgage.

While longer mortgage terms do provide relief in terms of lower monthly payments, borrowers must weigh up the consequences carefully. It may alleviate the immediate financial strain in monthly outgoings, but it extends the repayment period, resulting in higher overall interest costs. Additionally, the other significant risk is if the mortgage is extended into retirement and therefore impacts retirement planning.

What is the best mortgage term to take? Pros and cons of long and short mortgage terms

Longer mortgage terms


  • Lower monthly mortgage payments

The most significant advantage of opting for a longer mortgage term is the reduction in monthly mortgage payments. This can be a lifeline for those struggling to pay higher payments in the current higher interest rate environment.


  • Higher interest paid overall

The downside is the higher interest paid overall. While the immediate financial burden is lighter, borrowers end up paying more in interest over the extended term, impacting their long-term financial well-being.

Shorter mortgage terms


  • Faster payment of the mortgage

As the mortgage term is shorter, the period of time you will be paying back the mortgage will be shorter.

  • Lower overall interest costs

For shorter mortgage terms, the total interest paid is smaller as the loan is spread over a short period of time.


  • Higher monthly payments

Having higher monthly payments may be a downside depending on your unique circumstances. Although if you can afford to make these payments within your financial outgoings, this could leave you better off in the long run.

Can older borrowers get longer mortgage terms?

Access to longer mortgage terms for older borrowers is not always straightforward. While some lenders may have age restrictions on longer terms, others might be more flexible. It’s crucial for older borrowers to carefully consider the implications of a lengthy mortgage, especially as it may extend into retirement.

Longer mortgage terms and the benefits of overpaying

A longer mortgage term can be used strategically in certain situations for flexibility in your budget. While you can benefit from lower monthly mortgage payments in the short term, the ultimate plan would be to make overpayments on mortgage payments to pay the balance off earlier than the mortgage term. Most mortgage lenders will allow you to overpay 10% of the mortgage each month without a penalty charge. This method could lead to significant interest cost savings. Opting for a longer term mortgage has similar benefits to an interest-only mortgage, however with the intention to pay back the mortgage sooner.

In summary, determining the best mortgage term requires a careful analysis of your individual financial circumstances and needs. While longer terms offer immediate relief, they come with long-term financial implications.

For personalised guidance on choosing the right mortgage term, speak with a mortgage professional at 0800 980 8777 or email us at info@privatefinance.co.uk.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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