Soaring house prices has made it more difficult for first-time buyers to get on the property ladder. But so-called marathon mortgages could be the answer for some aspiring homeowners.
What are marathon mortgages?
The phrase describes mortgages that are paid back over longer periods of time. It comes as one in four buyers under 30 have a mortgage with a term of 35 years or longer, according to data from credit firm Experian.
What are the drawbacks?
Having a longer mortgage term gives buyers the means to borrow more and buy a pricier home. However, borrowing over a longer term means that you will pay more for the debt. For example, someone borrowing £300,000 over 25 years at a rate of 4.98% would pay a total of £225,320 in interest. Whereas borrowing the same £300,000 over 40 years at a rate of 4.98% would mean you’d repay whopping £392,887.
Is a marathon mortgage right for me?
Taking out a longer-term mortgage could be the difference between buying a home and not being able to. Younger borrowers under 30 could particularly find the stretch is a useful way of getting on the ladder. But anyone looking to take out a new mortgage should first have an idea of their budget and how much they can afford to repay each month.
How to get the best deal on your mortgage
Looking for a mortgage is complicated and the easiest way to search the market is by using a good independent mortgage broker. The larger your deposit as a percentage of the property price, the more favorable rate you will be able to get from lenders. You will also be able to unlock better rates if you have a good credit score and there are a number of steps you can take to help improve your rating. Don't wait until the very end of your mortgage term to look for a new deal.
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