Is a 40-year mortgage a lifeline or a life sentence?

Most people who choose a 40-year mortgage do so because they want a low monthly repayment. If you were to take a typical 25-year mortgage, your repayment would be higher. By stretching out the loan, monthly payments decrease.

WHAT YOU NEED TO CONSIDER

While lower monthly payments may be attractive and can represent your best chance of getting onto the housing ladder, there are downsides you should be aware of. Taking out a 40-year mortgage means you’ll pay more in interest, and you’ll find that you build equity, the amount of the property that you in effect own, more slowly.

Even if you don’t actually keep a 40-year mortgage for 40 years, the loan is designed with a 40-year timeframe in mind, so you could find that the interest rate is higher than it would be for a more traditional mortgage term. The chances are you’ll be making repayments in your retirement years, so that’s something you’ll need to consider. It makes sense to check that you can make overpayments if you can afford them and consider swapping to a shorter-term loan when your circumstances allow.

A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

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