Should you get a long or short term mortgage?

Choosing the right mortgage term is a vital part of getting a mortgage. Here is how to work out how long you need to pay off your mortgage, and make sure you don't pay more in interest than you have to.

Asian couple signing mortgage documents

Long term mortgages

ProsCons
Cheap monthly paymentsMores expensive overall
Rate rises have less effectTakes longer to pay off

Short term mortgages

ProsCons
Cheaper overallHigher monthly payments
Quicker to pay offRate rises have more effect

What is a mortgage term?

When you apply for a mortgage you can choose how long you have to pay it off.

Standard mortgage terms are 25 years, but you can get one that lasts between six months and 40 years in the UK.

For example, if you took out a 25 year mortgage in 2010 and made all of the repayments, it would be paid off in full by 2035.

If you are getting your first mortgage:

  • A term of less than 20 years would be a short term mortgage

  • A term of 30 years or more would be a long term mortgage

Remortgaging

If you already have a 25 year mortgage and switch to a new one, for example after five years, you can either:

  • Take a 20 year mortgage so you still own your home 25 years after you bought it

  • Take a longer or shorter term mortgage instead

What mortgage term is best?

  • Longer term mortgages cost less per month because the repayments are spread over a longer term. However, you pay more overall because you are charged more interest over a longer term.

  • Shorter term mortgages cost more each month but let you pay the balance off quicker. This means you own your home outright much sooner and pay less in total because less interest is charged.

For example, paying off a £160,000 mortgage with an interest rate of 4% would cost:

Mortgage term Monthly paymentOverall cost
25 years£845£253,362
15 yeara£1,184£213,030

Everyone has different financial circumstances. What may be best for someone may not be ideal for another. So the best mortgage term is one that results in affordable monthly repayments, but does not have you paying more in interest than necessary.

Which is better: 25 or 30 year mortgage?

Use a mortgage calculator to try different term lengths and find out how much it will cost:

  • Per month

  • Over the entire term

Choosing a 25 year term will be cheaper in the long run, but make sure you can afford the higher monthly payments. If a shorter term makes repayments too expensive, consider the longer 30 year term.

If interest rates go up later, your repayments will increase more if you have a shorter term, so make sure you consider rate rises when you budget for your mortgage.

Decide how long you want to repay your mortgage as well. For example, if you retire in 25 years and want to be mortgage free by then, you could choose a 25 year term if you can afford it.

Will you be offered a shorter term?

When lenders decide if they will accept your application, they look at your finances and make sure you are able to afford the repayments.

If you choose a short term that comes with repayments you cannot afford, it is likely your application will be rejected.

Can older borrowers get long term mortgages?

Some lenders will only offer mortgages that will be paid off before you retire and sometimes they have to be paid off before you reach a maximum age.

This means that older borrowers can only get short term mortgages with these lenders. Here is how to find a mortgage when you are older.

Should you overpay instead?

Some mortgages let you make overpayments. This means paying more than the amount due each month or paying off a lump sum.

Making overpayments has the same effect as shortening the mortgage's term: the balance will be paid off quicker and you pay less interest.

However, it gives you more flexibility because you can choose when you overpay, but having a shorter term means you have to pay a higher amount every month.

Check if your lender allows overpayments, if you can make them without paying a fee and if there is a limit to how much you can pay.

How to decide if you should overpay on your mortgage

Should you get a long or short introductory rate?

You can get mortgages that come with an initial interest rate for up to ten years. This rate can:

  • Be fixed for several years

  • Track another rate like the Bank of England base rate

  • Stay a certain amount below the lender's variable rates

If you get a fixed rate that lasts for several years, your interest rate and the amount you pay each month will stay the same, even if most other rates rise.

Here is how to decide on the type of interest rate you want and how long it should last.

If you're a first time buyer or looking to move house or remortgage, we can help you find the best mortgage deal to suit your needs.