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A mortgage is likely going to be the biggest financial commitment that you will ever make. The length of your mortgage is dependent on the amount you borrow, how much you are willing to pay each month, and the time duration the lender is willing to lend for. The overall mortgage term is the length of the time you need to pay back the borrowed sum plus interest.
Usually, 25 years is the standard length of a mortgage term. Any loan term longer than 25 years is considered an extended loan term. A few lenders offer extended mortgage terms that can be up to 40 years.
If you are able to afford higher monthly payments, your lender can offer you a short term mortgage. Short-term mortgages cost more per month but you can own your home much sooner as you pay the balance off quicker and pay less in total as interest is charged over a shorter term. A longer-term mortgage costs less each month but you pay more overall as interest is charged over the long term.For example, paying off a £150,000 mortgage with an interest rate of 4% would cost:
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A mortgage consists of two elements. The first one is the capital (i.e. the money you borrow) and the second is the interest charged by the lender on the amount you borrow.
If you choose a repayment mortgage product, you pay back the capital and the interest together by making monthly repayments for an agreed loan term. As you keep up with the repayments, your mortgage balance gets smaller every passing month.
With an interest-only mortgage, you only pay the interest due on the borrowed amount each month and pay back the capital at the end of the loan term. Although your monthly payments will be less, you still owe the original amount you borrowed at the end of the mortgage term. In this instance, it's common to have investment products running alongside your mortgage so that you have savings ready at the end of the mortgage term to repay the capital you borrowed
Note: Your lender may be able to combine both options, dividing your mortgage loan between repayment and an interest-only mortgage.
With both the repayment mortgage and an interest-only mortgage, you can be charged interest at a variable rate or a fixed rate.