There’s a growing trend towards longer, marathon mortgages, that spread the cost of a mortgage over 35 or even 40 years.
The extended mortgage term brings down the monthly cost, and for some first-time buyers, this may be the only way to afford a home of their own.
It helps to pass the lender’s affordability checks, and allows some borrowers to apply for a larger mortgage.
In this guide we run through what “marathon mortgages” are, how they work and take a look at some of the advantages, and disadvantages of having an extended term mortgage.
Marathon mortgages explained
A “marathon mortgage” could be classed as any mortgage where the repayment term exceeds 25 years.
For decades, the ‘standard’ term of a mortgage has been 25 years.
Now, due to rising property prices, borrowers are finding they need to extend their mortgage term, to help manage the monthly repayments.
And lenders have gradually allowed longer and longer repayment terms.
It’s now commonplace to see terms of 30-35 years, with some lenders offering 40 years.
Who would want one?
The primary reason for choosing an extended mortgage term is to reduce the monthly cost of a mortgage.
You pay the debt back over a longer term, so the payments become more affordable.
While this could be most attractive to first time buyers, the rising cost of mortgages and housing means that existing homeowners are now seeking ways to reduce their payments.
Bringing down the monthly cost will improve your mortgage affordability, and may allow you to qualify for a mortgage that, otherwise, would be unaffordable.
How do marathon mortgages work?
The basic idea is very simple.
If you spread the repayment of a mortgage over an extended term, you have more time to pay it back, and so the monthly cost reduces.
Here are some figures to explain, based on a £250,000 repayment mortgage, with a 5% interest rate.
| 25 years | 30 years | 35 years | 40 years |
|---|---|---|---|
| £1461pm | £1342pm | £1261pm | £1205pm |
You can see that the 40 year repayment figure is around £250pm less.
Now this may seem like a ‘no-brainer’, go for the 40 year term and save £250 each month.
Not so fast.
The consequence of choosing the longer term is that you will pay back a lot more in interest to the lender, and you may have to stay at work longer to do this.
How much extra do they cost?
The actual amount a marathon mortgage could cost you will depend on your own situation.
How much you decide to borrow, at what interest rate and over what mortgage term.
But, the figures below will give you a good idea of how much extra interest you could be paying.
| Term | 25 years | 30 years | 35 years | 40 years |
|---|---|---|---|---|
| Monthly | £1461pm | £1342pm | £1261pm | £1205pm |
| Total interest | £188,442 | £233,139 | £279,922 | £328,635 |
Let’s put this into some context:
If you chose the 25 year term, you would give the lender £438,300, of which £188,442 would be interest charges.
If you chose the 40 year term, you would give the lender £578,400, of which £328,635 would be interest charges.
Ways to reduce the cost
As you can see, borrowing over 40 years, instead of 25, dramatically increases the cost of borrowing.
This might seem impossible right now, but there are a few things you can do to reduce this extra cost.
Make overpayments
Overpayments are extra money that you give to the lender, over and above the monthly repayment figure. These amounts will reduce your mortgage debt, and reduce the interest charged.
The good part about overpayments is that you are in charge. So you can decide if an extra £50 or £100 per month is affordable.
Adhoc lump sum payments
Rather than paying extra each month, you could decide to give the lender lump sums instead, as and when it’s affordable.
So you could give them £500, or £1000, which will then reduce your mortgage balance.
Reduce the mortgage term
If you would rather have a more structured way of paying the mortgage back sooner, then you could look to reduce the term. This could be with your current lender, or as part of a remortgage.
The lender will then recalculate the monthly payments, based on the term you have chosen.
Note: This will formally change your monthly payments and is subject to affordability checks.
Check your limits
Before you make any extra payments, check what your lender allows and watch out for any early repayment charges.
You may find this article useful: A guide to short term mortgages
What’s the longest mortgage term you can get?
Your mortgage term affects how much you pay every month and the total cost over time. Recently, there’s been a change in the UK, with longer mortgage terms becoming more common. This article looks at the longest mortgage term you can get. We’ll explain what a mortgage term is, why it matters, and how it impacts your payments.
The pros and cons
Choosing to have a marathon mortgage will bring both benefits and drawbacks. It’s important to seek advice before making your final decision.
Advantages
The primary benefit of a longer term is that it makes the monthly payments more affordable and home ownership more attainable.
A marathon mortgage may allow you to borrow more (than with a 25 year term) and enable you to buy the home you need.
For some, this is the only option they have to become a homeowner.
Disadvantages
The biggest disadvantage is that you will be charged a lot more interest. For some, this is an acceptable trade off to getting on the property ladder.
Marathon mortgages cost more because you owe the money for longer, not because they have higher interest rates.
The longer term could also mean that your mortgage term extends into your retirement. For a lender, this tends to be from age 65 onwards.
CONTACT A MORTGAGE BROKER
If you are ready to take the next step then we can put you in touch with a fully qualified independent mortgage broker.
Borrowing into retirement
For many borrowers, having an extended mortgage term means that they will still be paying back their mortgage when in their 60’s.
There are lenders that will lend on this basis but they want to be sure you can still afford the monthly repayments, once you are in your retirement years.
If you are 25 now and wish to take out a 40 year mortgage, you will be 65 when the mortgage ends.
Trying to get these extended terms when you are getting older, will become increasingly difficult.
You will find more useful information in our guide to Borrowing into Retirement
Is a marathon mortgage right for you?
There’s no doubt that mortgages of more than 25 years are becoming more popular.
According to UK Finance, 19% of mortgages taken out by first time buyers in early 2023 had terms of 35 years or longer.
These extended terms provides an opportunity to enter the housing market, whilst keeping repayments at an affordable level.
To explore your options, contact an independent mortgage broker. They will be able to talk you through how these mortgages work and how your finances will be affected.
How a broker can help
Firstly, by speaking with a whole of market mortgage broker, you will have access to over 100 mortgage lenders.
Only a broker can give you this much choice.
Secondly, they can give you help and guidance with regards to all types of mortgages.
If you still feel that a marathon mortgage is your best option, they will search for the best deal and make sure you understand the costs and obligations.
