Many extending mortgage life to cope with payments
As most homeowners – and even non homeowners – will know the cost of meeting repayments on the mortgage has become increasingly difficult, with five interest rate hikes followed by three interest rate cuts, the global credit crunch, and soaring living costs and bills. To top things off many homeowners are set to come to the end of their current mortgage loan deals, such as cheap fixed rate mortgages, and will be looking around for another suitable alternative.
According to a number of mortgage loans brokers and intermediaries more and more people are now looking at a longer term option when it comes to their mortgage, and are opting for an extended mortgage term in order to keep repayments down and cope with their finances more easily. Many are looking to extend the term of their mortgage and others remortgaging but over a longer period.
Experts have shown that homeowners could make a significant saving each month by choosing a thirty five or thirty year term for their mortgage rather than the traditional twenty five year term. However, some officials have suggested that this move should only be a last resort, with one industry official stating: ‘If you are facing higher mortgage repayment, extending the term of the mortgage will reduce them but will increase overall costs dramatically. It should be treated as more of a last resort.’
However, one broker said that it was much better to extend the life of the mortgage or even to consider switching to an interest only deal than to be left trying to cope with unmanageable mortgage repayments and risking repossession. He said: ‘The key thing is that a homeowner who needs to remortgage must feel they can afford the higher payments. If they cannot, it is much better to either extend their mortgage or switch to an interest-only deal. These are much better options than the alternative which is to struggle with their mortgage.’