Extending your mortgage term is a viable option if you are struggling with your mortgage payments. Banks and building societies are becoming increasingly willing to offer longer mortgage terms. They benefit from great interest payments. The consumer benefits from spreading the cost of the mortgage over a longer term.
If you do decide to extend your mortgage term you will end up paying a greater total amount of interest. The longer the mortgage the greater will be the cumulative amount of interest payments that you make.
The monthly savings that you make will be a relatively small %. This is because in the beginning of a mortgage payment the majority of the monthly repayments are interest, rather than capital repayments. It is only the capital repayments that are spread over a longer time period.
Should I extend My Mortgage term?
Basically, if you have no problem meeting your monthly payments then it is best not to extend your mortgage term. If you wish to save and build up your wealth, you should be seeking to pay off your mortgage as quickly as possible.
If you a new homeowner and have been hit by an unexpected increase in interest rates you may find that your mortgage burden takes up too much of your disposable income. When your mortgage payments account for over 50% of your income, this is definitely a time to consider extending your mortgage term.
It is easy for financial advisers to say, don’t extend your mortgage term, but the expense of the UK housing market means that previous solutions are not always applicable.
Will I be Able to Extend My Mortgage Term?
This will depend on your mortgage lender and how old you are. For example, my mortgage provider, Standard Life, were willing to extend the mortgage to 47 years. This was the maximum because at the end of the 47 mortgage term I will be 67. However, it is worth bearing in mind that different mortgage providers will have different rules for extending your mortgage term. It is worth getting another mortgage quote if your current lender is unsympathetic to your request.
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