Less Than 25 Year Term Mortage

[hirop]

Before i trawl the internet for information, any thoughts or anecdotals from members about mortage products with a term of less than 25 years. Should I expect to pay a higher IR on these, is it something that I shouold go through a broker to get a specialist deal etc

If I wait out my own expectations in the market, it will mean being over 40 when I apply for a mortage. If I applied today I would be asking for £120K on 25 years for a 75% LTV deal - if I wait a full 3 years then I am looking at maybe £80K over 22 years, which would be about 50% LTV. Plus side, the target houses today will be cheaper then, or better houses will then be in my sights at todays prices.

[Mr Smith]

Mr Hirop,

I have only applied for two mortgages on 20 year terms or less, and neither lender seemed to care that it wasn't 25 years.

My last lender (Coop) did note that the 20 year term would take me into retirement, and asked me to write them a short note describing how I intended to pay off my mortgage once that happy day arrives. I did so, and they ticked the box. How they can predict when I'm going to retire is another question.

A specialist broker should not be necessary, unless there are other mitigating factors. A higher interest rate probably won't be forced on you, all things being equal.

Your mortgage is far more likely to be approved if your credit rating is pristine. It's amazing how many mortgage applicants don't know what their credit rating is. Be late with one credit card payment, and it shows. My last employer performed a credit check on me as a condition of my employment. Strange times. I suggest having a look at the Experian website.

Incidentally, partially-owning your first house in your forties is not as bad as you think.

Regards,

Mr Smith

[hirop]

Your mortgage is far more likely to be approved if your credit rating is pristine. It's amazing how many mortgage applicants don't know what their credit rating is. Be late with one credit card payment, and it shows. My last employer performed a credit check on me as a condition of my employment. Strange times. I suggest having a look at the Experian website.

I'm all over that sucker, and have been for 5 years. I'm old enough to have mildly-screwed up my credit in my early twenties, realised it, learned how it works, fixed it,know not to do it again. My main concern is that the lender stands to make less profit lending over 22 than 25, and therefore getting landed with a higher rate to compensate the poor banksters. If that is not common practice then great...lets the slow crash continue. I have no intention of taking 22 years to pay a debt, but they don't know that.

Edited July 16, 2011 by hirop

[Flopsy]

The HSBC was fine was a mortgage term under 25 years and offered us the same rate of interest (as the one we asked about initially). Didn't proceed and that was 2 years ago so don't know if it has changed.

[Jason]

You can take whatever term you want, just say you want 'x' years - 25 is the norm, but you can quite happily do less.

[Jie Bie]

I recently got a mortgage approval for a twenty year term, and the rate was the same as was being advertised for 25 years. So I don't think it's an issue, although not sure what the situation would be if you only wanted a five or ten year term.

[Djini]

Certainly as someone who has got 5 year fixed mortgages every time, when I start looking for the next fixed price I put 20 years, then 15 years, and (in the next year) 10 years etc they don't seem to care (i.e. it doesn't change the rate)

It DOES mean I also have a lower LTV ratio each time (it's currently 30% of the value of my property) but they don't care after 60%.

That's *re-*mortgaging of course... So YMMV.

[gilf]

I was in a similar boat, purchased Dec last year at 37 so would mean I would have been still paying a mortgage in my 60's. Not a problem for me but my wife is 40 so might have raised questions about payment in retirement.

We went for a 20 year mortgage, didn't have any issues and the interest rate is the same. We pay slightly more money per month but over all we will be paying less back than a 25 year mortgage.

Minimum period for a mortgage is 5 years.

[jonb]

Before i trawl the internet for information, any thoughts or anecdotals from members about mortage products with a term of less than 25 years. Should I expect to pay a higher IR on these, is it something that I shouold go through a broker to get a specialist deal etc

If I wait out my own expectations in the market, it will mean being over 40 when I apply for a mortage. If I applied today I would be asking for £120K on 25 years for a 75% LTV deal - if I wait a full 3 years then I am looking at maybe £80K over 22 years, which would be about 50% LTV. Plus side, the target houses today will be cheaper then, or better houses will then be in my sights at todays prices.

Mortgages of less than 25 years are very common. Usually when people remortgage, they mortgage for the remaining term of their previous mortgage, whatever that was. The interest rate is the same as for a 25 year mortgage. The only difference is that repayments will be higher because capital is repaid over a shorter period of time, and the monthly repayment is less sensitive to changes in interest rates, because the interest portion of the repayment is lower.