Remortgagers opt for longer mortgage terms
by Gill Montia
John Charcol has reported that increasing numbers of homeowners struggling with higher interest payments are opting to extend the terms of their mortgages to reduce monthly repayments.
According to research by the mortgage broker, between 10% and 15% of borrowers who have remortgaged in the past two months extended the lifetime of their loans, or switched to interest-only payments.
To offer a comparison, monthly repayments on a typical £155,000 mortgage over 25 years stand at £999.
Extending the loan to 30 years would reduce repayments to £929 per month, while lengthening the term of the mortgage to 35 years cuts the monthly bill to £884.
John Charcol spokesman, Ray Boulger, believes it is essential for remortgagers to feel they can afford their higher payments and that taking the loan over a longer period or switching to an interest-only deal is a better option that struggling financially.
However, homeowners need to be aware that tens of thousands of pounds can be added to the cost of a loan by either move.
In the case of the £155,000 loan at an interest rate of 6%, adding just five years to the term increases the total cost by £35,000.
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