Could a 30 year mortgage help you buy a home?

Longer mortgages can actually reduce your monthly payments

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Could a 30 year mortgage help you buy a home?

Longer mortgages can reduce your monthly repayments on a new home, and possibly make buying a property more realistic for many. So what do you need to know about mortgages that last longer than the normal 25 years?

New data shows a substantial increase in the popularity of these types of mortgages. A huge 58% of first-time buyers took this option in the second half of 2015, according to the Council of Mortgage Lenders.

The reason? For many it's a chance to spread the cost of a house over a longer period, and therefore reduce how much is needed every month.

So if you're considering one, what do you need to know?

The potential benefit

You can reduce your monthly repayments

Thanks to rising house prices and rocketing rents, it's becoming more and more difficult for first-time buyers to save for a deposit. Despite some of the lowest ever rates available on mortgages right now, it's still difficult to afford the monthly repayments on such high amounts buyers need to borrow.

So, a mortgage that lasts 30 years, or even 35 years, is a way to pay less every month as you've an extra five or 10 years to spread the mortgage across.

But don't forget...

You'll pay more over the course of your mortgage

The longer you have a mortgage, the longer you have to pay interest on the money you borrow. Over time this will add up, probably to tens of thousands of pounds.

It's worth making sure you can overpay on any longer term mortgages without having to pay penalty fees. If you get a pay rise or a lump sum, putting more into your mortgage will mean you pay it off sooner, and therefore reduce the overall interest you're charged.

You don't know what you're life will be like in 30 years

Thinking 25 years ahead can be a stretch - so 30 or 35 years is even harder. Halifax reported last year the average age for a first time buyer was 31. That's pushing the final payment closer and closer to retirement, and some lenders might not be keen on offering longer mortgages if this is the case.

It's also a longer period to be continuously remortgaging for. We don't know how interest rates will change in the next months and years, let alone in 30 years.

There's no guarantee a longer mortgage will be offered by the provider. You'll still need to demonstrate that you'll be able to afford monthly repayments in what's called a "stress test".

Lenders will look for how interest rates could affect rises would affect how much you can pay, and they'll look at potential changes to your life such as having a baby or being made redundant.

What are the other ways you could make your mortgage more affordable?

Getting a longer mortgage isn't the only way to make buying a house more affordable.

The new Help to Buy ISA could potentially give you a £3,000 bonus towards your deposit, while schemes such as shared ownership and Help to Buy (different to the ISA) can also reduce the amount you borrow – and therefore your monthly deposit.

This article is provided by the Money Advice Service.



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