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The pros and cons of choosing a shorter mortgage term

July 8, 2025

One of the key factors that affects your finances when taking out a mortgage is the term you choose. Read on to find out the benefits and drawbacks of choosing a shorter mortgage term.

“Mortgage term” simply refers to the length of time that you’ll repay the debt over. Traditionally, first-time buyers would have taken out a 25-year mortgage. However, rising property prices and other challenges getting on the property ladder mean many are choosing a longer mortgage term.

It might seem like the term will make little difference. After all, you’re still planning to repay the loan. However, it could have a significant long-term effect on your finances.

It’s not just those buying a new property that might need to consider the mortgage term. When your mortgage deal runs out, you often have an opportunity to reduce or extend the term.

So, here are the pros and cons of choosing a shorter mortgage term.

3 benefits of a shorter mortgage term

  1. You’ll spend less on interest overall

One of the main reasons why people opt for a shorter mortgage term is that it could save them money in the long term. As there’s less time for interest to be added to the loan, the total interest paid would be lower.

Imagine you use a repayment mortgage to borrow £250,000 at an interest rate of 4.5%. If you choose a 25-year term, the total interest paid would add up to more than £166,000. However, shorten the term by five years, and this falls to less than £130,000.

So, in this scenario, paying your mortgage over a shorter time frame would save you more than £35,000 in interest.

  1. You’ll be mortgage-free sooner

Another bonus of a shorter mortgage term is that you’ll be mortgage-free sooner. Reaching that milestone may be a cause for celebration. As well as being one less thing to worry about, it might enable you to focus on other financial goals, like saving for retirement or supporting your loved ones.

  1. You’ll build equity in your property faster

Equity refers to the portion of the property you own. So, if your home is worth £500,000, and you have a £250,000 mortgage, your equity would be 50%.

A shorter mortgage term means you’ll build up equity quicker. This could be useful when your mortgage deal expires and you’re searching for a new one. Typically, lenders will offer their most competitive interest rate to homeowners with greater equity. As a result, a shorter mortgage term could lead to lower repayments in the future.

3 drawbacks of a shorter mortgage term

  1. Your monthly repayments will be higher

One important drawback to a shorter mortgage term to consider is the effect it’ll have on your short-term finances. Usually, your mortgage repayments will be higher.

Let’s imagine you have a £250,000 repayment mortgage at an interest rate of 4.5% again. With a 20-year mortgage term, your monthly repayment would be £1,581. This figure would fall to £1,389 if you extended the term to 25 years.

So, a longer mortgage term might be valuable if you’d benefit from reducing your outgoings.

  1. There may be less flexibility

It’s important to keep up with your mortgage repayments – you could risk losing your home if you miss them.

A shorter mortgage term would mean you’ve locked in a higher monthly repayment, and it may not provide the flexibility that other options could. For example, if you choose a longer mortgage term but make regular overpayments, your debt will still be reduced at a faster pace, but you’d have the option to pause the overpayments if you need to.

  1. Your affordability will affect your suitability

In some cases, a shorter mortgage term might not be an option.

Mortgage lenders will test your ability to meet repayments. As a result, the outcome might suggest that you cannot afford the higher repayments of a shorter mortgage term.

Is a shorter mortgage term right for you? We could help you answer this question

If you’re deciding what mortgage term is right for you, we could help you understand how it might affect your finances and then work with you to identify a lender. Please get in touch if you have any questions.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Approver Quilter Financial Services Limited & Quilter Mortgage Planning Limited. 08/07/2025

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Approver Quilter Wealth Limited, Quilter Financial Services Limited and Quilter Mortgage Planning Limited 03/09/2024.

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