Mortgage Term - How do you decide?

Thrugelmir

getmore4less said:

CSL0183 said:

A good question but seeing as we are on MSE, surely the default answer to any borrowing is to borrow over the shortest term possible and the one you can afford? 

We don’t go through the same process with personal loans and car finance agreements (longest possible and overpay) so why would people opt for 35-40yrs for mortgages? Surely your first decade worth of payments will just be paying a load of interest off with a small amount of capital paid off? 

Lending is already very strict so that the bank will decide on what you can comfortably afford to pay. Your mortgage payment will already be x% amount of income. To go with huge terms, it’s ultimately acting not that much better than an IO product? I can see the benefit of having the freedom to make it up with overpayments but that needs serious discipline. 

Im in the shortest time possible camp. 

This is particularly true for depreciating assets you do not want to be borrowing for the next one while paying for the last one. 

When I first started out in the world of finance property was depreciated.......... (though land wasn't). 

dimbo61

Which brings me back to the flexability of Offset mortgages.
Take a long term say 40 years.
Tie yourself down to the best 5 year fix for Security and then put every spare penny into the Offset accounts you can.

K_S

Generally speaking, offsets are a good feature to have and there are a handful of lenders offering offset products out there at present.

However, in my experience, most clients are reluctant to pay the premium associated with the feature and rarely have (or expect to have) the amount of spare cash needed to make the feature worthwhile, so end up plumping for the least expensive product they can get at the time. 

kimwp

In the last two years, my income increased and it was frustrating to be losing out because my mortgage rate was higher than savings rates, but the repayment charges meant it didn't make sense to overpay more than the 10%. However, I'd still rather have a longer term in case it had gone the other way. In the end I did reduce the term, but only once I had saved enough to fully repay in addition to a substantial emergency fund.