Long term mortgage

[phester]

What are the disadvantages of borrowing 200k at a 40year term and then paying back extra.

I.E the amount that would have been required for a 30year at the same ammount?

Would this not mean that I have the option of lowering my repayments if I should not be able to keep up the extra amount. While all the time deducing the capital of the mortgage and hence reducing the intereset owed?

 

[ClubMan]

What are the disadvantages of borrowing 200k at a 40year term and then paying back extra.

I.E the amount that would have been required for a 30year at the same ammount?

Two main costs:

• €200K @ 5% over 30 years = total interest costs of €187K (in addition to the original €200K capital) while over 40 years it would be €263K - i.e. you pay €76K more in interest over 40 years. See Karl Jeacle's mortgage calculator.
• Your mortgage protection life assurance premiums will be higher since the initial term will be 40 rather than 30 years.

Would this not mean that I have the option of lowering my repayments if I should not be able to keep up the extra amount.

In which case? You can generally only lower your repayments with the agreement of your lender. Doing this may also impact your mortgage protection life assurance cover (you may need alternative cover). Conversely you can generally (on a variable/tracker rate owner occupier mortgage) accelerate your mortgage repayment using additional lump sum or regular capital repayments when you can afford them.

 

[Dreamerb]

I think the OP meant paying initially at the repayment level for a 30 year term albeit on a notional 40 year term, but then having the flexibility to reduce the payments to the lower level required to repay in the 40 year term if having financial difficulty.

To the OP: I don't see any major obstacle* or downside, provided that you are on a tracker rate with the greater flexibility that allows for overpayment. You'd need to check the terms and conditions of any loan offer. And as ClubMan points out, you will have higher life assurance premiums.

*Note however that 40 year terms are still relatively unusual in the Irish market, and many lenders will shy away if the term would exceed the balance of your working life. So if you're now 25 and expect to retire at 65, there may not be any problem; if, however, you're 37... I wouldn't expect lenders to jump at the chance of lending to you!

 

[phester]

thats the hard fact of 30 year vs 40 year.

but say the repayments for the 30 year are
1000pm

and the repayments for the 40 year are
800pm

I am on the 40 year mortgage and i pay back(over pay) the 1000pm are they not then the same?

mortgage will be payed back in 30 years??

I cant use the calc at work. Some java restrictions

 

[ClubMan]

thats the hard fact of 30 year vs 40 year.

but say the repayments for the 30 year are
1000pm

and the repayments for the 40 year are
8000pm

I presume you mean €800 p.m. above?

I am on the 40 year mortgage and i pay back(over pay) the 1000pm are they not then the same?

mortgage will be payed back in 30 years??

Yes but your total mortgage protection life assurance premiums will be higher. Also - as mentioned above - getting a 40 years mortgage in the first place may be difficult since such terms are unusually long in Ireland.

I cant use the calc at work. Some java restrictions

You may need to install the latest Java runtime.

There are some threads relating to shorter versus longer term mortgages among .