Latest figures show that the median age of a first-time buyer rose to 35 years, the highest on record, while only 20% of first time buyers were under the age of 30 years, compared to 60% in 2004.
Mortgage terms of up to 35 years can be taken and lenders all have different rules on the age of a mortgage applicant at time of expiry of the mortgage. Depending on the lender age at expiry of the mortgage can be max normal retirement age 65 years, others are 67 years and max standard term to date had been at 70 years.
As supply and affordability pushes out the age of the average first time buyer it also decreases the term a mortgage can be taken over.
The average loan term in Ireland for first time buyers between 2017 to 2022 hovered at 29 years.
Will I pay more interest if my mortgage term is longer?
The answer is YES.
Mortgage term is a key factor when taking out a mortgage as it determines your repayment and also the overall cost of credit or total interest you repay during that mortgage term.
Here’s why mortgage term is such an important consideration.
The interest that you will repay over your mortgage is huge, it is called the cost of credit and will be set out on your mortgage loan offer. There are three ways to reduce your mortgage interest – borrow less, reduce your interest rate (important! Speak to our advisors at doddl to ensure you get lowest rate) or reduce your mortgage term.
Taking mortgage terms specifically here. When you are taking out your mortgage ask yourself – could I afford to reduce the term down from 35 years to 30 years or say from 30 years to 26 years? What is affordable?
The lower mortgage term will increase monthly repayments but if affordable it will massively benefit you as you will pay less interest on the lower mortgage term.
If you borrow €350,000 and assume APRC of 3.45% then Interest repayable over various terms are for example as follows –
35 year term = €253,286
30 year term = €212,285
25 year term = €172,843
20 year term = €135,011
Choose 30 years over 35 years save €41,001 interest over the term.
If you can afford 25 years instead of 35 years then you could save €80,443 over the term.
Speak to your advisor at doddl about repayments over various terms, don’t just run with max term that is available, if you can afford the lower term then your future self will thank you! Clear your mortgage earlier and pay less interest, win, win.
If you have started with a longer term and now want to reduce it, we can also help. Speak to one of our team of 45 mortgage specialists who can answer all of your questions –
What has changed in 2024?
Did you know that some lenders now offer mortgage terms that expire when you are age 80 years?
This year three mortgage lenders in the Irish market started to offer mortgages into retirement and up to age at expiry 80 years, with maximum term 35 years. These lenders are non bank lenders, MoCo, ICS Mortgage and Finance Ireland.
Lending post retirement will be restricted only to those who can demonstrate a proven income stream into retirement from example net rental income, sufficient pension in place etc.
Would you take a mortgage that would run to when you turned age 80 years?
If you asked any new mortgage holders if they would like to still be paying their mortgage at age 80 years, I think you could be fairly certain the majority would respond with a big NO!
Paying your mortgage over a longer term will also increase the amount of interest that you repay and this applies regardless of what age your mortgage expires.
Just as an aside and if your curious, here are our thoughts as to why someone might want to take out a mortgage term up to 80 years of age at expiry.
First off just to say, we certainly do not think that mortgage terms up to 80 years at expiry will become commonplace (and would not recommend them to the masses, it is a very niche offering).
Clients will either want it to increase affordability, allow them to borrow more or value it from a cashflow perspective where they prefer to invest funds rather than prioritise clearing down their mortgage.
Remember it will only be available where you can show pre retirement income that can service the proposed mortgage post normal retirement age.
Some mortgage applicants who might want to increase their mortgage term –
- A younger applicant, purchasing with an older applicant, age is based on elder applicant
- With a loan servicing firm paying interest only on home loan currently and want to extend term
- Someone asset rich with large post-retirement income from a buy to let portfolio
- Midlife customers who want to buy a home – divorcees looking to buy out or move on (number of divorced people in Ireland increased 20% between the last two census in Ireland
- People are buying later, living longer, choosing to invest money in different ways that they deem more beneficial than accelerating the repayment of their mortgage.
