Morto
https://www.bbc.co.uk/news/articles/c5y547vq9z1o
di JB_UK
Morto
https://www.bbc.co.uk/news/articles/c5y547vq9z1o
di JB_UK
20 commenti
Interesting article. Shorter seems better because you can pay it off sooner but I can imagine if you can budget well to have lower rates then general wage inflation will surpass your repayments, so on a longer term you’re paying less than the % of disposable income.
Id be curious as to how it ties into age. I would have thought it’d be closer to 35 but I suppose if your buying at the wrong side of 30 then going for a 35 year is potentially just not feasible if your planning to retire before 70. Our advisor said they can even offer 40 year mortgages which is bonkers
Not surprised though, with prices skyrocketing a 25 year is just not feasible for people wanting to either be in the city or to have a house large enough to support a family. Especially with how stagnant UK wages are.
Not to mention in the current climate being able to have a “safer” mortgage with the option to overpay trumps one that ends quicker.
Mine was 35 years when I started it 6 years ago. Plan was to start overpaying to bring the term down once I was earning more or had paid off my student loan, but interest rate spikes prevented that from happening yet. Still finishes before I expect to retire even without overpayments.
House sellers can charge you as much as you’re able to pay, and banks will lend you as much as you can pay over your life time. End result: houses cost as much as you are able to pay over your life time. The 5x salary multiple limit was meant to help with this, but I think even that’s too high.
Whole thing feels like a scam. Of course you gotta pay for development costs, but we’re often talking about very old houses which have been paid off ages ago. Not to mention development costs are often very high because of the cost of land, which is exacerbated by this mortgage problem.
A 30 year Mortgage at 4%-5% means paying double over the lifetime of the mortgage.
So a £300,000 mortgage on a 30 year term will cost £600,000 over its lifetime. Add in 30% (ish) tax burden on work and young people need to make about ~£900,000 in earned income to pay for an average home – unless born into wealth.
Something to keep in mind when the government announces its spending and tax priorities this autumn.
This doesn’t surprise me. When I got my mortgage 9 years ago I did it based on monthly payments as I was buying the flat I had been renting, so just said can I continue to pay that amount and it worked out 19.2 years so would be paid off by 52 years old. I was lucky to change to a 5 year fixed just before the big interest change so I’m only paying 0.4% more than I was (I checked 3 days later and it had gone up 6%!) – I do overpay but I can see why people don’t want to risk struggling with paying for everything else. I was just really lucky to get a good price, change mortgage at the right time and also I now earn 45% more than I did 9 years ago but am still paying the same amount, so do have the luxury of overpaying and having a rainy day fund. I remember at the time my parents saying I should have gone for a 2 bed (my flat was £98k a 2 bed would have been £200k) but I’m glad I didn’t do it or I wouldn’t be able to do anything other than very basic living.
Don’t own yet, but if I did, I’d go long.
I’d rather free up cashflow in the short term, invest it, and have inflation and wage growth eat up my monthly repayments over time
This isn’t new. I did it in the 90s (30 year term) as it was the only way I could afford the repayments as a solo buyer. Some of my friends did the same. You hope you might be able to increase the payments to close early but it doesn’t always work out. Mine finally finishes this autumn.
Interesting to see over payments in this. We took 32 years to keep the monthlies low, but then over pay as and when
I was required by the lender to take my first mortgage over 34 years (ending as I turned 65) because of their bs affordability checks (Never use Accord aka Yorkshire but that’s another story).
It’s actually not a bad idea because it meant my required payment was only 1k. I worked out I actually needed to pay 1600 to pay it off over 20 years (what I wanted). So after month 1 I called up and increased the payment to that.
Because I was over paying, I could then call up and pause payments. Doing so is obviously going to extend the time taken to pay the loan. But it gives borrowers a high degree of safety: within 2 years I was almost a year ahead so if I’d had some issue I could have paused for that long without any risk of repossession, credit record damage etc.
You have to be disciplined enough to make those payments…
Yep just took out a mortgage on my first time buy, moved in last month (first mortgage payment came out today!). 5% deposit and 30 year mortgage. Glad I’m no longer renting more than anything, can’t tell you how soul destroying pissing away nearly half your supposedly middle class pay cheque on rent is.
In the us the normal mortgage has always been fixed rate 30 year
It’s better to take out a longer term mortgage, but make regular overpayments, as these come off the outstanding capital. If you do this, you end up paying less overall than taking out the shorter term mortgage, but you need to be disciplined with the overpayments.
Absolutely nothing in life should be that expensive that you need a generation to pay off.
If they are they’re daft. It smacks of not having a sufficient deposit and wanting to live where it’s unaffordable.
Why wouldn’t you take out the longest mortgage possible? Virtually all mortgages have some kind of overpayment facility. Borrow over the longest period you can, keep the monthly required payment low and overpay to reduce the term. No reason to commit yourself to higher payments if you don’t need to.
I would always take the longest term I can. Over the long run equities returns > mortgage interest so any extra capital I would’ve spent on an increased my they payment can be invested.
Mine was started out at 35 years, 7 years ago, it’s now 22.5 years left. Just started overpaying when I could afford it and it’s made a right dent in the interest already.
40 years for me, if all goes to plan. For the bank that is!
It was the only option for us, as no one would offer a lower term without a significant increase in monthly costs. I think 35 years was like £250 a month more.
Hope is as we improve it, we will gain equity and we know this property will always have a unique selling point because of its location.
However if that doesnt happen then, goodbye family home i guess.
Luckily i can work until im 75, assuming i dont have any failing in my health etc 🤣
Isn’t this in part because it just makes sense to take the longest term possible?
Take a 40 year term so you have maximum flexibility. You can then overpay it anyway so that you’re monthly repayments are equal to or more than a 25 year term. Remortgage after your fixed rate period ends anyway.