Mortgage term refers to the full life period of mortgage. It’s the number of years and months you’ll make payments to the lender until it’s pay off. With an interest-only mortgage, until you finish paying interest on the original loan and repay the money you borrowed.
A mortgage term isn’t the same as a mortgage product, which is the rate of interest you pay for a certain period of time, such as a fixed rate for five years, before moving to another product or your lender’s standard variable rate.
How Mortgage Term work?
he term is the length of time you’ll take to pay back the money you’ve borrowed plus interest charged, and any other fees. Your balance will get smaller each month and, at the end of the mortgage term, there will be no outstanding debt, provided you’ve met all payments, and you will own the property outright.
So if you take out a 25-year repayment mortgage in 2021 when you’re age 30, you’re set to be mortgage-free by 2046, when you’re 55. With an interest-only mortgage, the term is how long you’ll pay interest charged on your original loan.
Time Period of Mortgage Term
However, loans are not too longer but, the standard terms in the UK is 25 years, but longer-term mortgages of 30 or more years are increasingly common, with some lenders stretching to 40 years. The shortest mortgage term available is generally five years, but some go down to three years.
When you’re deciding on a terms, bear in mind some lenders won’t agree to a term that extends into retirement. So they may stipulate a maximum age you can be when your terms will end.
Effect of Overpayments
here are usually overpayment restrictions though, where you can’t exceed a certain amount without paying a penalty. This is often the case with fixed-term deals. So make sure you’re clear on whether your mortgage agreement offers this facility, and when any penalties kick in. Also consider when the best time to make one-off overpayments.