Should I increase my Mortgage term?

Should I increase my mortgage term?

In this blog we examine the pros and cons of this decision.

In the face of rising interest rates we are seeing many homeowners come to us to review their mortgage options, and see if a saving can be made on their mortgage costs

One question that commonly arises is, “Should I increase my mortgage term?”.

As a homeowner, making savvy decisions relating to your mortgage structure should be a top priority.

The answer, however, isn’t as straightforward as one might wish.

The correct response is a highly individual one, depending largely on your personal finances, home ownership goals, and lifestyle choices.

Here’s a closer look at the benefits and drawbacks to weigh up when considering extending your mortgage term.

Pros of extending your mortgage term

1. **Lower Monthly Payments**: Firstly, by extending your mortgage term, you stand to decrease your monthly repayments. This could ease the financial strain on your monthly budget, freeing up more disposable income for other commitments or savings.

2. **Financial Flexibility**: A reduction in monthly mortgage payments also brings greater financial flexibility. This could enable you to manage unexpected expenses or take advantage of investment opportunities as they arise.

3. Debt Consolidation: Extending the mortgage term may allow homeowners to consolidate other higher-interest debts into their home loan – leading to potentially significant interest savings. Cons of extending your mortgage term

The cons of extending your mortgage term

1. **Increased Overall Payment**: Although you’ll be paying less each month, extending the term means you’ll be paying your mortgage off over a longer period. Consequently, the total amount you pay back to the lender would be higher due to more interest being accrued overtime.

2. **Longer Repayment Term**: An extended mortgage term lengthens the period of debt, delaying the date you will own your home outright. Furthermore, if you plan on moving house in the future, an extended term mortgage can limit your equity growth.

3. **Future Financial Uncertainty**: While lower payments may be appealing now, the financial landscape may change in the future. Rises in interest rates can significantly increase the total sum you repay.

**Decision Making**

When weighing your options, consider your financial situation, your goals, risk tolerance and plans for the future. Some important questions to answer are:

– Can I comfortably afford my current monthly repayments?
– What are my financial goals and how does my mortgage fit into these?
– How many years do I plan on staying in my current home?
– How would a potential rise in interest rates affect me?

Looking at the pros and cons, there’s no one-size-fits-all answer. Extending your mortgage term can bring certain benefits, like lower monthly payments and enhanced flexibility. However, the increased overall payment and a longer repayment term are important factors to consider.

In any scenario, it’s always advisable to consult with a qualified mortgage adviser before making a decision.

Making sure you perform a thorough analysis of your finances, your short-term and long-term needs, and always keep an eye on the market to make a wise and informed decision.

A good mortgage adviser will advise a path that not only fits your current lifestyle but also aligns with your future goals.

Remember, the goal is to maintain a balance between your life today and the one you are preparing for in the future.

If your current mortgage deal is coming to an end in the next 6 months, it is advisable to get ahead of this with plenty of time to assess your remortgage options. You can read more about remortgaging here https://mortgageswithclarity.co.uk/what-is-refinancing/

Our advisers are on hand to help you. Please reach out today to review your mortgage in plenty of time to ensure you have the peace of mind in this current financial climate.

‘Your home may be repossessed if you do not keep up repayments on your mortgage’

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