Take Advice on The Most Appropriate Mortgage For The Short & Long Term
2 minute read
The Financial Conduct Authority (FCA) notes that there has been a significant fall in the number of ‘marathon mortgages’ for 40 years or more in the last couple of years. Although a good way to get a foot on the home ownership ladder, securing bigger loans in more expensive locations, savings in monthly payments can be outweighed by higher interest rates over the long term.
70% of first time buyers are now opting for 30 and 35 year mortgages, resulting in a 20% increase during 2020; with monthly repayments on a typical 35 year deal around £684. However, based on a typical 2.25% interest rate, borrowers could pay an extra £27,000 in interest over the entire period compared to a 25 year mortgage with monthly repayments averaging £867.
Longer mortgage terms can be a viable option for an initial period of, say, five years, which is the average before first time buyers move to a bigger property. But are they the best option for your individual circumstances, and choice of home? There is a big difference between buying brand new and a ‘doer-upper’, in terms of both price and value to a lender.
Consequently, it is essential that homebuyers take advice before committing to a property purchase because, as with any financial contract, getting the best deal will have a long term impact. Buyers need to consider their future plans: how long do they intend to stay in a property before moving to something better suited to having a family? Do they want to stay with the same mortgage provider?
Lenders can refuse to transfer a mortgage to a different property, and need to be satisfied that it meets their valuation requirements. They will also require evidence that borrowers’ incomes (including the self-employed) have not reduced, and they are not in debt.
Whilst lenders have been told by the regulator to make it easier for borrowers to get mortgages during the pandemic, they have a responsibility to ensure that terms are affordable.
Just Mortgage Brokers have the latest information on the most appropriate deals, with experienced advisers on hand to discuss a range of options. Give us a call.