Mortgage terms for first-time buyers

First-time buyers have a lot to think about when buying a home – including choosing the best mortgage term for their needs.

A mortgage term is the name given to the amount of years it takes to repay your loan and interest. The longer it takes to pay – which is classed as the ‘term’ – the lower your monthly repayments usually are. Don’t forget your repayments are for the interest as well as the loan itself.

Traditionally, first-time mortgages were for 25 years. But lower interest rates over the past couple of decades and lenders’ flexibility means there are more options these days. That means you can pay your home loan over more years.

The most recent statistics from TSB Bank shows that the average term for first-time buyers is now 32 years. It has increased from 30 in 2021.

Longer mortgage terms for first-time buyers

The best mortgage terms for you depends on your individual circumstances. This includes how much you have saved for a deposit and your other spending commitments. 

Mortgage lenders today can offer terms of 30-40 years – or even up to 45. Of course, the longer the term the more you’ll pay in interest. But that extra flexibility means you can choose to pay off your mortgage over a longer period to make it more affordable. 

As with any homebuyer, you need to meet the requirements of mortgage lenders before being offered any mortgage terms. We’ve a page of advice for first-time buyers here.

What is the current average term?

While the average is 32 years, more first-time buyers than ever are choosing 35-year terms. Official figures from UK Finance show that one in five first-time buyers choose mortgage terms over 35 years in 2023. The previous year, only 10% of first-time buyers chose 35-year terms. That means double the number choosing that length of time to pay doubled in just one year.

The drawbacks with longer terms

Paying over a longer term means lower monthly payments. This may seem affordable, but don’t forget that you will be paying a lot more over time. 

For example, let’s consider that you are buying a home for £225,000 with a 10% deposit and a fixed mortgage rate of 5%. If your term is 25 years, your interest repayments would be in the region of £150,000. But a 40-year term pushes that up to more than £260,000. As you can see, the monthly payments might be lower but you’ll pay more in the long run.

As with any financial decision, it’s best to speak to an expert who can explain your options. You must balance whether paying more over a longer term is better than paying less over a shorter one. 

Use our mortgage calculator for initial ideas on figures, but it’s always best to speak to us for actual figures. You will also need to look at your budget. Do you really need to spend that much on gym membership, for example? A cheaper membership means you have more available towards your monthly mortgage repayments. Writing down your spending helps set a budget for your mortgage. We’ve looked at this previously and this will help you prepare a budget.

Changing your terms

Although you take out a mortgage for 35 years, it doesn’t mean it’s fixed for that length of time. At The Mortgage Dog, we advise an initial two-year scheme. That doesn’t mean you have to pay it in two years, but it means you’re not tied in for the entire length. By reviewing every two years, it allows us to work out whether you can reduce the overall term.

Over time, your monthly payments reduce the amount you owe, which allows you to reduce your term. And you can overpay your mortgage so you owe less and that allows you to reduce your overall term.

What should I do now?

If you’re a first-time buyer needing advice about your mortgage terms, we can help. Contact our team today for advice.

Remember, no matter what your mortgage terms are, your home may be repossessed if you do not keep up your repayments on your mortgage.