Extending a mortgage by 10 years costs the average first-time buyer £87,000

Data from mortgage broker Mojo Mortgages' has revealed that the average mortgage term that a first-time buyer now takes out is 30 years. 

However, whilst a longer mortgage term can provide some short-term relief in the form of a lower mortgage payment per month, they come with significantly higher overall interest charges over the life of the loan.

Extending a mortgage by 10 years costs the average first-time buyer £87,000

In fact, Mojo Mortgages' data has revealed that extending a mortgage from 25 to 35 years can cost the average first-time buyer an extra £87,180.

John Fraser-Tucker, the Head of Mortgages at Mojo Mortgages said: "Our research has found with the current average mortgage rate for a 2-year fix (75% LTV) at 5.44%, the total cost of an average-priced house (£285,000) varies significantly on the loan term. 

"For a 25-year loan term, the total mortgage cost would be £391,200, which includes the principal amount and interest charges. However, if you extend the loan term to 35 years, the same house will cost an additional £87,180, bringing the total cost to £478,380."

Based on the average mortgage rate and house price, extending your mortgage rate by:

• 1 year can cost an additional £8,472

• 2 years can cost an additional £17,040

• 5 years can cost an additional £42,600

But how do these figures differ throughout the UK? 

The following table provides a comprehensive regional breakdown of the financial implications of extending mortgage terms by 10 years (from 25 to 35 years) across different parts of the UK. 

This data, based on the current average mortgage rate of 5.44%, reveals significant variations in the additional costs incurred when opting for a longer mortgage term.

Key statistics

• A longer mortgage term can cost Londoners an extra £160,000: Topping the list, London homeowners face the highest additional costs. While extending the mortgage term from 25 to 35 years reduces monthly payments by £304, it adds a staggering £159,840 to the total mortgage cost. On a typical London property priced at £523,376, this means paying £878,640 over 35 years instead of £718,800 over 25 years.

• The South East follows suit with an additional cost of £115,000: In the South East, first-time buyers can save £218 per month by opting for a 35-year term, but this seemingly small difference accumulates to an extra £114,840 over the loan's lifetime. The total mortgage cost jumps from £516,000 to £630,840 on an average house price of £375,693.

• Extending your mortgage by 10 years in the East of England will cost an average of £104,000 extra: Homeowners in this region might save £196 monthly with a longer term, but they'll pay an additional £103,200 in total. The mortgage cost for an average £337,757 property increases from £463,800 to £567,000.

• The North East sees the smallest impact - less than £50,000: The North East sees the smallest impact, with an additional cost of £49,680 when extending the mortgage term. This correlates with the region having the lowest average house price at £162,360.

Choosing a longer mortgage term may impact your pension and later life planning

John Fraser-Tucker added, "Our research highlights the importance of considering the long-term financial implications when choosing a mortgage term. While the monthly savings of a longer term may seem attractive, the substantial increase in overall cost could significantly impact future financial planning, including pension contributions and retirement lifestyle."

Beyond paying more overall, mortgage borrowers may be forced to use their hard-earned pension funds to pay off their outstanding mortgage balance upon retirement, undermining their financial security in their golden years and increasing the risk of poverty in old age.

In less extreme cases, longer mortgage terms may deprive borrowers of an important period leading up to retirement when they could have been mortgage-free. This window of opportunity can be used to boost pension contributions or to enjoy experiences and activities that may not have been possible during their working years.