Below are two examples of the main types
of mortgage available today:
You pay off part of the capital each month as part of your regular
payment. With the ‘repayment’ method, your monthly
payment will contain an element of repayment of your capital
in each payment alongside the interest due. The proportion
of each will change through the term of the mortgage. Repayment
mortgages have certain advantages; the debt will reduce with
each monthly payment you make, albeit that the reduction will
be gradual in the early years. As the debt reduces, the amount
of capital repaid increases; this would normally increase
your equity in the property. Making payments in full as they
fall due guarantees the mortgage will be repaid in full at
the end of the term. Lenders tend to be more flexible about
rearranging payments and altering terms when necessary.
Interest Only Mortgages
This is a mortgage where interest-only is payable and the
capital is intended to be repaid at the end of the term by
an appropriate repayment vehicle such as ISAs, PEPs, pensions
or endowment policies. Occasionally, people will take out
an interest-only mortgage, utilising a number of methods of
ultimate repayment, which may even involve selling a property
to repay the loan. We are not authorised to provide advice on repayment vehicles.
The above descriptions represent only fairly basic guides. For further information or assistance click here for our consultant to contact you.