Research from Mojo Mortgages has revealed that extending a mortgage term from 25 to 35 years could cost the average first-time buyer an extra £87,180.
This significant increase is based on the current average mortgage rate for a 2-year fix at 75% LTV, which stands at 5.44%.
John Fraser-Tucker, head of mortgages at Mojo Mortgages, explained: “Our research has found that the total cost of an average-priced house (£285,000) varies significantly depending on the loan term.
“For a 25-year loan term, the total mortgage cost would be £391,200, including the principal amount and interest charges. However, extending the loan term to 35 years would bring the total cost to £478,380, an increase of £87,180.”
The analysis also revealed regional differences in the financial impact of extending mortgage terms.
London homeowners face the highest additional costs, with an extra £159,840 added to the total mortgage cost when extending from 25 to 35 years.
In contrast, the North East sees the smallest impact, with an additional cost of £49,680.
Fraser-Tucker further warned that choosing a longer mortgage term could have significant implications for later life planning: “While the monthly savings of a longer term may seem attractive, the substantial increase in overall cost could significantly impact future financial planning, including pension contributions and retirement lifestyle.”
