The media is currently abuzz with talk of 35- to 40-year mortgages. Rising interest rates have made monthly payments higher than they were a couple of years ago. A long loan term is appealing because it lowers the monthly payment. But is it really worth it?
Why a long loan term seems appealing
For many people, a traditional 25-year mortgage now seems out of reach. Although the situation has eased from the peak levels of 2023–2024, when interest rates exceeded four percent, the average interest rate is still significantly higher than it was a few years ago.
In January 2026, the average interest rate on new mortgages was approximately 2.84 percent. That sounds reasonable, but for a €350,000 mortgage, the difference between a 25-year and a 35-year loan term still amounts to several hundred euros a month.
The bank may only approve the loan if the repayment term is extended. This is especially true since more than 80 percent of new loans are annuity loans, in which the monthly payment remains the same as long as the interest rate does not change.
But a lower monthly payment comes at a cost. A high one.
Interest payments are increasing by almost the same amount as the loan
Think of it this way: At the current interest rate (approx. 2.84%), you’ll pay about €200,000 in interest alone over 40 years on a €300,000 loan. If interest rates rise to 4%, the interest alone will exceed the principal amount of the loan. That’s enough money to buy a new home.
This doesn’t mean that a long-term loan is always a bad choice. It means that you need to know what it will cost.
When might a long loan term make sense?
Sometimes a 35-year mortgage is the only way to buy a home. If the alternative is to keep renting for years, even a long-term mortgage can be the right choice.
A long loan term can also serve as a temporary solution. You can start with a longer loan term and shorten it later as your income grows or your life situation changes. With an annuity loan, this can be done through extra payments.
Some people want to keep their monthly payments low and invest the difference. However, this requires discipline and investment skills. In most cases, it doesn’t work in practice.
The direction of interest rates influences the decision
The 12-month Euribor rate has been rising gradually since the summer of 2025. By mid-May 2026, it stood at around 2.7 percent. The market expects interest rates to continue rising at a moderate pace, and the rate is expected to be closer to 3 percent in 2027.
If you expect interest rates to rise, a fixed-installment plan may be an attractive option. With this option, your monthly payment stays the same, but if interest rates rise, the loan term automatically extends. A balloon payment, on the other hand, has the lowest total cost, but the initial payments are higher.
Here’s how to calculate the actual costs
Don’t just focus on the monthly payment. Calculate the total cost over the entire loan term for the different options. You’ll probably be shocked by how big the difference is.
Also consider your flexibility. A longer loan term means lower monthly payments, but you can always make extra payments when you have the money. Use OUN®’s new loan simulator and freely try out different scenarios using your own information.
The housing market won’t wait for your decision
Housing prices have now been falling for 3.5 years. That is just as long as the worst period of the 1990s recession. A turnaround seems to be on the horizon, but it has seemed that way for a long time, and it looks like it’s still on the horizon.
If you find a suitable apartment and can only secure financing with a longer loan term, that may still be a better option than waiting. The market may not offer another opportunity.
The most important thing is to make a decision with an open mind and based on the facts.
Now there are long-term loans, but is it worth it?
When the amounts are large, even a small change in the right place can have a big impact.
Once you’ve run the numbers on our calculator, finalized your loan negotiations, and are ready to move forward, be sure to check the condition of the property before making a purchase.
