How long does a mortgage last?

There is no right length (term) to a mortgage. The standard term is around 25 years, and most of us tend to have a mortgage throughout our working lifetime. With the large sums involved, this spreads the cost and makes your monthly payments more manageable.

However, you can choose a different term if it suits you and the lender agrees that you can afford it. If you can afford a shorter term you may have higher monthly payments but pay less in total (see table below). With a longer term, you may pay less each month but more in total.

Ask for ‘Key facts about this mortgage’ documents showing different mortgage terms and use Section 5 to compare the total cost of a mortgage over different terms. Try not to make financial commitments that go past the age you retire unless you're sure you'll be able to afford the payments.

Example of how the term alters the cost of a repayment mortgage if interest is 6% a year.


In Summary

1. Remember that a mortgage should fit comfortably with your earnings and your commitments.

2. Don't take out a mortgage that runs past your retirement, if you're not certain you will be able to afford it.

Choosing a Mortgage Broker

Choosing a mortgage has never been easy, but in recent years the market has exploded. Gone are the days when the major decision you had to make was between a variable and a fixed rate. Now, every lender seems to have a number of different product, from offset mortgages that set your savings interest against your mortgage interest, to self-certification mortgages for the self-employed, cash backs, discounted rates, fixed rates, stepped fixed rates, etc. etc. etc.

Making sense of all the different options and working out which is best for you is where Hanson Wealth Management comes in.

A mortgage broker is basically a financial adviser with specialist knowledge of the mortgage market. They have access to special mortgage deals that won't be available directly from the lender and so should be able to get a better deal than a consumer doing their own mortgage research. They will also save you a great deal of time and energy.

We have a specialist department that takes enquiries by telephone or over the internet. An authorised adviser will then telephone to ask a number of questions (which takes about 15 minutes) to obtain more detailed information on your requirements and answer any questions that you may have. The research team will then search the whole of the market using our state of the art technology to find the most appropriate deals for you. If you are happy with the quotations provided then we can handle your mortgage from application through to completion. We can arrange face to face meetings with advisors or we can take care of everything using e-mail and telephone. The choice is yours.

For more information, you may wish to contact an IFA (Independent Financial Adviser) who will be able to take you through the options available to you and help you find a deal to suit your needs. Hanson Wealth Management would be happy to talk you through your options, you can contact us on 0800 881 8085 or alternatively you can leave your details on the application form here.

Keep borrowing comfortable

Work out your budget using our Budget calculator to see how much money you’ve got coming in and going out and how much money you’ve got to spare.

Don’t overstate your income to get a bigger loan. If you lie about your income, you could end up with a loan you can’t afford and possibly lose your home. You’ll also be committing a fraud and could get a criminal record.

In Summary

Do work out your budget first.

Don't borrow more than you can afford to repay.

Don't be tempted to overstate your income to get a bigger loan - it's fraud.

How much can you borrow?

Lenders should lend responsibly

This means that they should consider whether you can keep up the mortgage repayments now and throughout the term of the mortgage; for example after an initial discount period ends. They should base this on things like your income, expenditure and other circumstances.

• Mortgage lenders have traditionally offered to lend up to three-and-a-half times your salary (before tax).
• If you’re buying as a couple they would normally include the smaller earner’s salary, multiplied x 1.
  
• Alternatively, many lenders have offered a couple’s total salary x 2.5.

Higher multiples dependant upon affordability have started to appear over the last few years but care should always be taken to ensure that a mortgage remains affordable.

Please feel free to try our range of mortgage calculators and mortgage tools to see which deal will be best for you.

Lenders may take into account

• If you have other money coming in, such as bonuses, overtime or commission. However, since it isn’t guaranteed income, lenders may only take into account half of this money.
  

• If you already have lots of expenses, such as other loan payments, they will offer you less.

Recently it has become more common for lenders to make an affordability assessment when calculating how much they are prepared to lend you. Each lender will have its own method, but generally they will all try to calculate your disposable income, taking account of:

• your total income;
• any credit commitment such as loans and credit cards; and
• household bills and living expenses.

Whether you receive mortgage advice or not, the lender must still lend responsibly. However, it's always worth satisfying yourself that you can afford the monthly payments - use our Budget calculator to make check your affordability

Types of Mortgage

Repayment mortgages

Every month, your payments to the lender go towards reducing the amount you owe as well as paying the interest they charge. So each month you're paying off a small part of your mortgage.

The pros: It's a simple, clear approach - you can see your loan getting smaller.

The cons: In the early years your payments will be mainly interest, so if you want to repay the mortgage or move house in the early years, you'll find that the amount you owe won't have gone down by very much.

Interest-only mortgages

As the name suggests, your monthly payment only pays the interest charges on your loan - you're not actually reducing the loan itself. This is why it's very important you arrange some other way to repay the loan at the end of the term; for example, through an investment or savings plan.

If you choose this option you will need to check that your investment or savings plan grows accordingly, so that at the end of the term you'll have enough money to pay off the loan. If it doesn't grow as planned, you will have a shortfall and you'll need to think about ways of making this up.

The pros: Because you're only paying off the interest, and not the loan itself, your monthly payments will be lower.

The cons: That debt is not going to go away. Throughout the life of the mortgage, you'll need to check your investment or savings plan is on track to repay your loan at the end of the term. If you can't repay it at the end of the term you could lose your home.

In Summary

Choosing a repayment or interest-only mortgage is one decision. The other will be to choose the interest-rate deal.

Please feel free to try our range of mortgage calculators and mortgage tools to see which deal will be best for you. Alternatively, you may wish to speak to an IFA (Independent Financial Adviser) who will be able utilise professional tools to search through the thousands of mortgage deals to find the best deal for you. You can contact our mortgage experts here.

The Basics

What is a mortgage?

"A mortgage is like any other kind of loan – you borrow money, and you pay it back with interest over a period of time. But it has one key difference: it’s secured against your home. So if for any reason you can’t repay it, the bank or building society can sell your home to recover."

How Mortgages Work

• You take out a loan based on how much you can afford and the value of the property, for a length of time agreed between you and the lender.
  

• You are charged interest on the loan, usually based on the Bank of England base rate which is reviewed monthly.

• You pay the mortgage back in one of two ways, repayment or interest-only– see the Types of Mortgages’ section.

• You can choose different deals for your interest rate, such as fixed or discounted – see the ‘Types of interest deals’ section.

You can choose to pay your mortgage back in the following ways:

• repayment;
• interest-only; or
• a combination of the two.

You'll need to decide which is best for you. To do this, you can try our range of mortgage calculators and mortgage tools to see which deal will be best for you. Alternatively, you may wish to speak to an IFA (Independent Financial Adviser) who will be able utilise professional tools to search through the thousands of mortgage deals to find the best deal for you. You can contact our mortgage experts here.