First-time buyers are being warned they could pay tens of thousands of pounds more interest if they sign up for 40-year mortgages.
Sales of longer-term mortgages have reached record levels, with most young buyers choosing to borrow for more than the traditional 25 years.
The monthly repayments are smaller, so they can afford bigger loans to buy their dream homes.
Fifteen years ago virtually every first-time buyer had a 25-year mortgage, but high prices have forced people to look for new ways to beat the market.
Now more borrowers are taking out longer terms. The typical term is 30 years, but many are choosing terms of 35 or 40 years so they can take bigger steps onto the housing ladder.
It’s clear what the attraction is, with the monthly payment being much less when taking out a longer term.
What’s happening is that the interest paid each month stays the same but the repayments of capital, which form part of the monthly bill, are spread out over a longer period. That’s the good news.
The problem is that you have to pay interest for an extra 15 years, you are going to pay thousands more in interest over the life of the mortgage.
Mortgage regulation has been tightened up, with stricter controls on what people can afford with their regular incomes.
But there are no rules limiting the length of mortgage terms or stopping families who are already up against it from committing themselves for four decades.
Homeline Mortgages recommend you keep you mortgages under review and shorten the payback period as soon as you can afford to make higher payments, such a strategy will save you a fortune.
Here at Homeline Mortgages we build long term relationships with our clients and will continue to help and advice you throughout your mortgage term. Call us today on 01202 937444 to speak to one of our mortgage experts.