37 year mortgage - the only option

Bleon

Hi 

Does anyone else have a 35+ year mortgage ? Or help put my mind at rest that I’m not making a huge mistake?

We are FTB , 2 young kids with no more planned. We have a decent £52k deposit and have had an offer accepted on a house at £230k 

We have been renting for 7 years and it’s been tough building the deposit up but are totally fed up of paying someone else’s mortgage.

Our issue has been the amount that we can borrow , my partner currently works part time due to the young kids and on a poor wage so has very low annual income,  so this has meant we are really limited and the only way we have been able to borrow enough is with a 37 year mortgage. We are 32 years old 

The mortgage will be fixed for 5 years, we can easily over pay  and the logic behind this is that we will remortgage in 5 years when the kids are both at school and my partner can do more hours.

Im just worried about the amount of interest we will be paying and then really negative things I’m reading about a mortgage of this length, but it’s either that or keep renting.

any advice or support would be appreciated 

thank you

Sistergold

I think it’s best to get the mortgage anyway you can then change the conditions of your mortgage later. Renting is not ideal for most people especially with family already where you are not planning to be moving residence frequently. The interest will be determined by how long you actually take to pay. So the quicker you pay it the better as interest is charged daily. Long term mortgage will mean less payment commitment for now and better affordability but if You never made overpayments then you would have paid a lot of interest cumulatively. You just need to make overpayments which will reduce the mortgage term indirectly and save on interest or reduce mortgage term after the 5year fix when your wife is working more hours. Age is also on your side. 

Bleon

Sistergold said:

I think it’s best to get the mortgage anyway you can then change the conditions of your mortgage later. Renting is not ideal for most people especially with family already where you are not planning to be moving residence frequently. The interest will be determined by how long you actually take to pay. So the quicker you pay it the better as interest is charged daily. Long term mortgage will mean less payment commitment for now and better affordability but if You never made overpayments then you would have paid a lot of interest cumulatively. You just need to make overpayments which will reduce the mortgage term indirectly and save on interest or reduce mortgage term after the 5year fix when your wife is working more hours. Age is also on your side. 

Thank you so much, I really appreciate your advice. It’s good to know that  overpaying can make such a difference , which should  be easy to do 

[Deleted User]

I'd agree with the above, you can always change things around later.

If you're going to overpay, try and be disciplined with it - it must be so easy to not do that once you get into the house and your day to day bills etc. are coming out and it's easy to just end up spending the £X you've got left over.

If you're going to put even £50 per month against your mortgage, try to do that on pay day for example. Then you know it's done and hopefully you can get into that habit.

After 5 years, LTV might be lower than you expect - then you can look at changing things up, including reducing term (and if the LTV is a lot lower, possibly getting a much better product than you'd have got if you'd only paid the contracted payment)

jim1999

I've done similar - took a 35 year, but in the knowledge that I could comfortably overpay if I wanted to.

The risk, really, is in taking a 37 year mortgage at the age of 32, and then carrying on until you're 60+ and suddenly realising that neither of you are able to continue earning decent money and you've not funded your pension.

If you continue to be frugal and work on building up your pension / paying down the mortgage and renegotiating the rate over time rather than throwing all the spare money at luxuries I don't think it's necessarily such a big problem.

Sasahara

If your overpaying, effectively you won't be on a 37 year mortgage

Assuming you'll be remortgaging at the end of the 5 year fixed period that's what you should be concerned about.

So just get the best rate for the length of fixed period you require.  Make sure you know any limits on overpayment, there are penalties if you go over these.

RetSol

Agree with jim1999 said:

I've done similar - took a 35 year, but in the knowledge that I could comfortably overpay if I wanted to.

The risk, really, is in taking a 37 year mortgage at the age of 32, and then carrying on until you're 60+ and suddenly realising that neither of you are able to continue earning decent money and you've not funded your pension.

If you continue to be frugal and work on building up your pension / paying down the mortgage and renegotiating the rate over time rather than throwing all the spare money at luxuries I don't think it's necessarily such a big problem.

I agree with this.  It's basically what I've done over the last 30 years and I have just semi-retired at 55.  Live within your means, buy a property, pay down the mortgage, pay into a pension.  Sorted. 

Petriix

Our '30 year' mortgage will be paid off inside 15 years. The length of the term should be seen as a hypothetical maximum. The longer the term, the lower your minimum monthly payment will be so you can have a great deal of flexibility.

Overpayments reduce the interest for the entire remainder of the term. You should aim to pay it off as quickly as possible after paying off any more expensive debt first and paying into any savings where you can accrue more interest than you would save on the mortgage. As long as you're not planning to drag the payments out for the full term, there's no need to worry about the actual length. Just make absolutely sure that your chosen mortgage allows overpayments. We can pay up to 10% of the original loan each year on top of our regular monthly payments.

strawb_shortcake

I wouldn't worry about the current term, it will change as you get older, earn more and remortgage. 
I took out a mortgage 4 years, 2 yr fixed rate over 32 years. We remortgaged 2 years ago and knocked 7 years off by increasing our repayment by £50 per month. 
We have since been in a position to repay 2 x 10% overpayments and are now down to 15 years and 10 months. We probably won't make any more big overpayments as the aim is to have it paid off when I'm 50 or 13 years time. Plus its very affordable and we like having money in the bank

getmore4less

The length of the mortgage is secondary to the rent or buy evaluation.
If the costs of owning is cheaper than the cost of renting then you look to buy somewhere.
 Cost of buying is the interest on the loan + the extras for maintenance insurance etc.
if the interest only stacks up against renting buying is a no brainier*.
The repayment mortgage is just a savings scheme longer the term the slower you save.

* there are factors like it can cost more to move when owning so you have to consider if you need  mobility renting can still be the right option. 
It is hard to time the move from rent to own but you tend to only do it one way once owning you stay owning.
Once owning is cheaper than renting it tends to stay that way.
Even in the house crash scenario at the end of the long game you still have something.

Thrugelmir

Take the longest mortgage term you can obtain if it helps you get on the ladder. Then immediately start overpaying by whatever you can afford, however little it is. Over the years the overpayments will compound and the interest savings will build and the term naturally reduce. One day your children will be independent and you can tackle the mortgage full on.