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clv101

Why 25 Year Mortgagees

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Why do people typically take out 25 year repayment mortgages? I was just thinking about the kind of mortgage I was most likely to take out when I do eventually buy a house in the future and 15 year repayment seemed to make much more sense. I'd much rather borrow a smaller amount over a shorter period than a larger amount over a longer period (same monthly repayments). What's so special about 25 years?

Edited by clv101

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Because it means you are in economic slavery till the day you retire? That is what the System wants.

I have not looked into it too closely but, with current HPs, I do not see how people could even pay off a mortgage in 25 years.

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Why do people typically take out 25 year repayment mortgages? I was just thinking about the kind of mortgage I was most likely to take out when I do eventually buy a house in the future and 15 year repayment seemed to make much more sense. I'd much rather borrow a smaller amount over a shorter period than a larger amount over a longer period (same monthly repayments). What's so special about 25 years?

Just the way it is.. depends what you can afford.. some people would be overstretched repaying in 15 years...

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According to economist David Boyle, during the explosion of suburbs in the 30s most of the houses were purchased with 15 year mortgages.

The bigger and bigger mortgage over longer and longer periods in another problem of ever-looser controls on credit. Let the money supply inflate without much restriction and the entire planet - governments, nations, individuals become debt slaves.

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Exactly the same principle applied up to the 80s in retail in particular the motor trade.

The limit on hire purchase was three years, with a 25% cash deposit or 25% equity in the the new purchase from a P/Ex. Woe betide the trader who tried to **** up the deposit by inflating the price f the vehicle to cover the depost. loss of credit licence and immediate withdrawal of credit facilities from the finance houses.

Made good sound economic common sense for all concerned. The retailer the finance house and most important the punter, skint or overstretched punters with no equity in the product the day after purchase is a disater waiting to happen.

Overstretched and deeply indebted punters cannot buy again and keep the windmill turning.

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Why do people typically take out 25 year repayment mortgages? I was just thinking about the kind of mortgage I was most likely to take out when I do eventually buy a house in the future and 15 year repayment seemed to make much more sense. I'd much rather borrow a smaller amount over a shorter period than a larger amount over a longer period (same monthly repayments). What's so special about 25 years?

If you borrow a larger amount, you will get a nicer house. That's the attraction of 25-year mortgages, and indeed interest-only mortgages. If you're happy with whatever you can afford on a 15-year mortgage, then go for it.

But remember that the mortgage term is largely nominal. Most mortgages are redeemed well before the end of the mortgage term, due to people moving or remortgaging. So all you're really doing with a 15-year mortgage is choosing to save a bit more money -- it doesn't really translate to a shorter mortgage term as such.

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On the other side of the equation, it is worth remembering that there is a reason for the banks and building societies to keep the term of the mortgage down. This is that the punters all retire at some point and their ability to repay normally drops quite a bit at that point.

No mortgage adviser wants to try to figure out whether a particular applicant will still be in employment in his or her early sixties, but their headquarters set policies which take the likelihood of retirement into account.

This mean that 25 or 30 year mortgages are the most you are likely to get. Getting a 25 year mortgage on reasonable terms is less easy once you turn 35 and very hard indeed if you are over 50. A 40 year mortgage product would run into the same problem once the punters turned 25 and so would have a very small market.

As others have said, most people reorganise their mortgage from time to time and very few mortgages are held all the way through to the original term, so the restrictions are less important than they sound.

:)

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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