Mortgage Term - How do you decide?

IAMIAM

Curious as to what determines your mortgage term?
Do you do the longest available (35/40 years) so you are in control and can overpay, use money for other things and ultimately maybe pay more into a pension and or save a rainy day fund or indeed utilise drops in LTV/Value to change things regularly...or do you go for the shortest term you can afford to pay off quicker and give you more discipline?

K_S

@IAMIAM For my personal mortgage, I prefer the former - the longest possible term with minimum committed monthly payments and making overpayments if appropriate.

Clients often start off wanting the shortest term possible as they want to minimise interest paid, and rightly so. However, once I explain how overpaying can achieve the same effect as shortening the term, with the advantange that you can stop o/p any time you want, quite a few of them end up opting for longer terms.

Quite often I end up using Martin Lewis' trust quotient to make this point by forwarding Martin Lewis's article explaining the same

https://www.moneysavingexpert.com/news/2015/03/decrease-the-term-or-overpay-my-mortgage-martin-lewis-answers/

MovingForwards

I went for longest term (23 years) with a plan of clearing it in 10, but the option of sticking with monthly DD payment and not making the additional overpayment by faster payment if my financial circumstances change for the worse.

It's personal preference based on various options within life and plans.

getmore4less

The term just sets a payment. 
What you pay determines the term.

Setting a lower contractual payment gives options.

Once you set a higher payment you remove those options. 

A change in circumstances might mean you can't lower your payments once set.

Some might want to consider ERC free overpayment limits but if you are fixing short term like 5 years you can just save and do lump sums. 

IAMIAM

Agreed, I think the maximum term is always the way forward, covid had probably confirmed that for many! 

dimbo61

So you want to pay a mortgage till your retirement age or longer ?
Your happy to pay twice the amount you borrowed because you can find a thousand and one "things" to waste your money on each month ?
You don't think the idea of becoming Mortgage Free ASAP is good ? 
Giving you options to retire early or take on a part time job, travel more or take a less stressful career ?
I don't want to give mortgage lenders one penny more of my hard earned money than I need too.
I reduced the term of my mortgage from 23 years down to 10 ! Now this increased our mortgage payment by £500 a month BUT it saved us £50,000 in Interest over the mortgage term

IAMIAM

As people say, you cant take it with you! I would rather have a £250 monthly mortgage until age 75 and LIVE instead of paying £1000 a month and drop dead at 50 with nothing to show for it apart from inheritance for the next generation with say 10k left to pay on a house that will ultimately be sold. 

Thrugelmir

Work out how much additional interest you'll pay extending the term from 25 to 40 years and you may get a shock.  

IAMIAM

I did, it was 15k. I was thinking 1k a year extra. I also think Martin Lewis article on it is spot on. Decreasing a term and overpayment fundamentally do the same thing and so the one where the consumer controls is favourable as long as you are disciplined in overpayment.

strawb_shortcake

We had to take a longer term, 32 years as I was the only earner, this was 5 years ago through overpayments and increasing monthly payments when we remortgaged, we are now down to 15 years remaining. 
I like having the shorter term, it gives much more flexibility should I face financial difficulty, if I was at the max term I'd have no wriggle room.
I am fortunate that my mortgage is quite small so I'm not stretched by it so it doesn't feel as if I'm choosing between paying down my mortgage or having disposable income.

Thrugelmir

Longer term interest rates aren't going to remain at emergency levels. 

Majority of consumers lack the discipline to overpay consistantly. Greatest risk is the challenges that life throws into the mix. Death, divorce or financial distress.  Leveraging with debt can so easily backfire at an individual level.