Can I Get a 40 Year Mortgage?

The once-standard 25-year mortgage term is increasingly being overshadowed by the option of longer terms. One of the longest mortgage terms currently available in the UK is the 40-year term. As people look for ways to reduce their outgoings, the question 'can I get a 40-year mortgage term?' is more popular than ever.

In this insight, we tackle the question and help to weigh up the pros and cons of the 40 year mortgage.

Key Takeaways

• Longer mortgage terms, such as 40 years, are becoming more popular in the UK as people seek ways to reduce their monthly housing costs.
• You can get a 40-year mortgage in the UK, but eligibility typically requires demonstrating that your income can cover the full term, which may extend into retirement. Many lenders also have an age cap of 75.
• A mortgage term refers to the duration in which you must repay your mortgage loan. Different mortgage types, such as capital repayment and interest-only, affect what you owe at the end of the term.
• While a 40-year mortgage can offer lower monthly payments, it also results in higher total interest payments, a longer duration of debt, and slower equity building. It's essential to weigh these advantages and disadvantages before choosing this option.

Can I Get a 40 Year Mortgage?

Yes, you can get a 40 year mortgage. But, to be eligible you must be able to provide enough proof that your income will cover the full term, and this could mean into retirement. Many lenders will also impose an age cap of 75. 

If you do not want your retirement income to be considered, you will need to be no older than your planned retirement age when the mortgage is paid off.

What Is A Mortgage Term?

A mortgage term refers to the duration within which the mortgage loan has to be completely repaid. For instance, if you opt for a capital repayment mortgage, you will have nothing left to pay at the end of your term. However, if you choose an interest-only mortgage, only the interest will be paid down at the end of the term, leaving the capital amount still outstanding.

What Is a 40 Year Mortgage Term?

A 40-year mortgage term is a type of home loan that extends for a period of 40 years. It's longer than the more common mortgage terms, which are typically 15, 20, 25, or 30 years in many countries, including the United States and the United Kingdom.

Here are some key characteristics of a 40-year mortgage term:

• Longer Repayment Period: A 40-year mortgage allows borrowers to spread their payments over a longer period, which can result in lower monthly mortgage payments compared to shorter-term mortgages.
• Lower Monthly Payments: Because the loan is extended over four decades, monthly payments are typically more affordable for borrowers. This can make homeownership more accessible to those who might not qualify for or afford a shorter-term mortgage.
• Higher Total Interest Payments: While the lower monthly payments can be attractive, it's important to note that a longer mortgage term usually leads to paying more in total interest over the life of the loan compared to shorter-term mortgages.
• Extended Time to Build Equity: With a 40-year mortgage, it takes longer to build substantial home equity, as a significant portion of the initial payments goes towards interest rather than principal.
• Age Considerations: Some lenders may have age restrictions or consider your age when offering a 40-year mortgage, as it can extend well into your retirement years.
• Limited Availability: In many markets, 40-year mortgages are less common and may not be offered by all lenders.

Pros and Cons of a 40 Year Mortgage Term:

Like any other financial decision, opting for a long-term mortgage has its advantages and drawbacks.

Advantages of a 40 Year Mortgage Term

Lower Monthly Repayments:

Stretching your mortgage over a longer period means your monthly repayments will be smaller. This can make your mortgage more manageable and potentially help you pass your lender's affordability checks.

Improved Affordability:

With a longer term, the monthly repayments are smaller, making it more likely for you to pass your lender's affordability tests, particularly if you're a first-time buyer. This could make home ownership a reality for you.

Greater Flexibility:

f your income fluctuates, perhaps because you're self-employed, a longer-term mortgage could offer more flexibility. If your mortgage deal permits overpayments without penalties, you may choose to overpay when you have the finances to do so, and pay lower repayments when your finances are tighter.

Disadvantages of a 40 Year Mortgage Term

Higher Interest Payments:

Over a longer mortgage term, you'll pay more interest to your lender. This can amount to thousands of pounds more, despite the benefit of lower monthly repayments.

Longer Debt Duration:

 40-year mortgage means it will take 40 years before you fully own your home. This is a considerable commitment, especially if you are young, as many things can change over four decades.

Slower Equity Building:

With a longer mortgage term, you'll be building equity in your home at a slower pace due to your lower monthly repayments. This could be a disadvantage if you're planning to move again in the short term.

Which Lenders Offer 40 Year Mortgages?

Several lenders now offer 40-year mortgage terms. For instance, HSBC UK has introduced its longest-ever mortgage term to provide people with lower monthly repayments. This term is available on new residential mortgage applications on a capital repayment basis, including for first-time buyers. For applications that involve interest-only payments, HSBC UK's maximum term of 25 years still applies.

HSBC UK has also increased the maximum term to 40 years for buy-to-let applications on both capital repayment and interest-only mortgages. The bank has observed an increase in customers opting for terms of more than 35 years over the past 18 months.

While such a long mortgage term may seem appealing, especially with recent sharp increases in mortgage rates, it's essential to consider the potential implications on your retirement plans. Stretching repayments over a longer period could lead to higher interest payments, and you may end up paying more in the long run.

Can I shorten an extended mortgage once I’ve taken it out?

Once you've completed your initial mortgage product term (e.g., a fixed-rate or variable-rate period), you can typically reassess your financial situation and discuss options with your lender to reduce your mortgage term and pay off your loan sooner. This might involve switching to a different mortgage product or making overpayments. It's essential to communicate with your lender and explore the available options that align with your financial goals and circumstances.

Can I get a 40-year mortgage at 37?

Lenders usually set a maximum age limit for the end of your mortgage term, typically between 70 and 85. Therefore, 40-year mortgages are generally best suited for individuals under 30. 

As 40 year mortgages are typically designed for younger borrowers who can spread their payments over a longer period. Lenders may have age restrictions and evaluate your ability to repay the loan throughout its term, considering your age and financial circumstances. It's advisable to check with specific lenders to see if they offer such mortgages and if you meet their eligibility criteria.

Can I get a 30 year mortgage at age 55?

Yes, it is possible to get a 30-year mortgage at age 55, but it will depend on your individual financial situation and the policies of the lender. Lenders typically assess your ability to repay the mortgage, including factors like income, credit history, and debt-to-income ratio, rather than just your age. However, keep in mind that the maximum age at the end of the mortgage term may still be a consideration for some lenders, and it could affect the terms and conditions of your mortgage.

What’s the longest mortgage term you can get in the UK?

The most common mortgage terms are 25 and 30 years. However, it is possible to find lenders who offer mortgage terms of up to 40 years as a maximum, though such extended terms are less common.

Is It a Good Idea To Get a 40 Year Mortgage?

Choosing the best length of term for a mortgage largely depends on your personal circumstances - both now and in the future. While a longer mortgage term may make your monthly repayments smaller and your mortgage more affordable, you'll end up paying more interest and your loan won't be paid down as quickly.

Before making a decision, it's crucial to seek advice and go over all your options. Longer-term mortgages can be an attractive option for those looking to get onto the property ladder sooner. However, those who opt for longer-term mortgages must bear in mind that they will eventually end up paying more back in interest.

So, can you get a 40-year mortgage term? Yes, you can. But it's vital to consider all the implications, weigh the pros and cons, and make an informed decision that aligns with your financial goals and circumstances. Remember, owning a home is a significant milestone, but it's essential to ensure that your journey to homeownership is financially sustainable and beneficial in the long run.