Home Buyers Guide

Chapter 6: Choosing the Right Mortgage

Step 6: Choose the right mortgage term

The mortgage term is simply the number of years you take your mortgage over. Mortgage terms can be as short as 5 or 10 years and as long as 40 years. Usually, the lenders will require you to complete your mortgage by the age of 70, so for example if you are 34 now, the maximum term you could get would be 36 years.

There are two main factors you should consider when you are choosing your term.

Mortgage Approval Amount.

Most lenders calculate how much you can borrow based on how much of your pay packet is used up by your
mortgage payment.

The longer the mortgage term is, the lower the monthly payments will be, so with many lenders, the longer the
mortgage term, the bigger the mortgage they will approve you for.

If you are trying to get as big a mortgage as possible, you will probably have to go for a longer term. If you choose a tracker or a variable rate mortgage, you can usually reduce the term at a later stage.

Interest Payments:

The other factor to consider is that the longer the mortgage term, the more interest you will pay. So, everything else being equal, if you take a shorter mortgage term, you can save a lot of money in interest payments.

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