The term of a mortgage is one of the decisions with the biggest impact on both your monthly payment and the total cost you'll end up paying, yet many buyers decide it almost automatically, accepting the maximum term offered without comparing alternatives.
The relationship between term, payment, and total cost
The longer the term, the lower the monthly payment, but the greater the total number of payments and, therefore, the more interest you'll pay over the life of the loan. The shorter the term, the higher the monthly payment, but the total interest cost drops considerably, since the principal is paid off faster.
A simplified comparative example
For a €150,000 loan at a fixed rate of 3%:
| Term | Approximate monthly payment | Approximate total interest cost |
|---|---|---|
| 15 years | Highest | The lowest of the three |
| 20 years | Intermediate | Intermediate |
| 30 years | The lowest | The highest of the three |
The difference in total interest cost between a 15-year term and a 30-year term, for the same principal and interest rate, can be very considerable, often adding up to tens of thousands of extra euros simply from extending the term.
Why many people choose the longest term available
The usual reason for choosing the maximum available term is to maximize buying power by lowering the monthly payment, which also makes it easier to meet the maximum debt-to-income ratio the bank requires (usually around 30-35% of net income). A longer term lets you access a more expensive home with the same affordable monthly payment.
An intermediate strategy: a long term with early repayments
A common alternative is to sign for a longer term (to have more of a safety margin on the required monthly payment) and, whenever your finances allow, make occasional early repayments to reduce the actual effective term and the total interest cost, without committing upfront to a higher mandatory payment.
What factors should influence your decision
- Your current and expected long-term income stability.
- Your age, since many banks cap the maximum term so the loan ends before the borrower reaches a certain age.
- Your priority between monthly flexibility (longer term) or lower total cost (shorter term).
Compare different terms with your own numbers
Our mortgage calculator lets you simulate the payment and total cost with different terms, so you can directly compare how your situation changes depending on the length you choose.