The mortgage term

Traditionally, mortgages are arranged over a term of 25 years and you agree to repay the loan by or at the end of the term. Shorter or longer mortgage terms can be arranged - it all depends on how much you can afford and how quickly you want to finish the mortgage.

When considering how long you want your mortgage to run, you should bear in mind a number of points:

• Most mortgages are supported by earned income. You should think about how your income may change in the future and arrange your mortgage term appropriately
• With a repayment mortgage, the longer the term, the lower your monthly payments will be but the more interest you will pay in total, and vice-versa: the shorter the term, the higher the monthly payments, but the less interest you pay in total
• If you take out an interest only mortgage and are relying on the returns of an investment plan to repay the loan, you should ensure that the terms of both the mortgage and the investment are sufficient to allow the investment to build up adequate funds to repay the loan at the end of it’s term
• Whatever the term of your loan, since interest is paid on the amount of the capital balance, less interest is paid in total on a repayment loan (where the capital reduces) compared with an interest only loan (where the capital balance stays the same) Early Repayment Charges

Most mortgages have early repayment charges, these are typically within the product period. For instance, if you have a five year fixed mortgage, there may be a 3% charge of the loan to be repaid if you redeem the mortgage within those five years.

Be careful! – some mortgages have redemption charges which are longer than the product period, so when you revert to the lender’s Standard Variable Rate you still don’t have the flexibility to move or remortgage without penalties. Always check your options before agreeing to a particular product.

A mortgageforce™ consultant can provide valuable advice to ensure you can avoid any such penalties wherever possible.