repaymenttypes

There are two main options for repaying a mortgage loan, a repayment mortgage or an interest only mortgage.

Remember, that our mortgage advisers will explain your mortgage options in more detail to help you choose the type of repayment that best suits your circumstances.

Repayment Mortgage

A repayment mortgage is the traditional means to pay back a mortgage – you make payments every month, part of which goes towards repaying the money you have borrowed (the capital), and part of which pays the interest on the loan.

The advantage of a repayment mortgage is that, provided you have kept up with the monthly payments, you are guaranteed to have paid off the loan by the end of the mortgage term.

In the early years of a repayment mortgage, more of your repayment goes on paying the interest rather than the capital. Our mortgage advisers will explain this to you and provide an illustration of how this works.

Interest Only Mortgage

With an interest-only mortgage you do not pay back any of the capital until the end if the mortgage term. You only pay the lender the interest due on the loan each month. 

Repayment of the capital is usually covered by long term payment into an investment scheme, designed to have accumulated sufficient returns by the end of the term to pay off the loan.

There are various types of investment schemes used to cover an interest-only loan, which include endowment policies, pensions and ISAs. The returns on these plans are not guaranteed and it is the responsibility of the individual to ensure that sufficient funds are available on maturity to repay the mortgage

Contact our helpline on 01206 240800 today to see how we can help you with your mortgage arrangements