| Index »Mortgage Repayment Methods |
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| Mortgage Repayment Methods
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| With several different mortgage repayment methods, and with thousands of mortgage deals to choose from, deciding which is right for you can be a confusing experience.
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| What Kind Of Mortgage Repayment Method?
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| There are four main ways to repay your mortgage.
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| Repayment and Interest only mortgages are the two most popular types of agreement. You can also find investment backed and part and part deals.
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| Which Mortgage Repayment Method Is Right For You?
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| Each repayment method has pros and cons, and you will need to decide which type fits your needs best. The basic differences are:
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| Repayment Mortgage
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| Your monthly mortgage repayments comprise of capital and interest payments combined so that by the end of the mortgage term, you have paid off the original amount borrowed plus any interest that has been accrued. This type of mortgage is therefore suitable for people who want the peace of mind of knowing that their mortgage will be paid in full at the end of the term. This is the most popular method of repayment. Your monthly repayment pays off the interest owed and a part of the initial capital borrowed.
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| Interest Only Mortgage
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| An interest only mortgage is structured so that only the interest is paid back to the lender each month. The original loan amount remains the same for the term of the loan. A suitable investment plan is usually set up in order to repay the loan at the end of the term e.g. an endowment, an ISA or pension plan . With these you only pay off the interest owed each month, so you can put your money into other investments. You will need to pay off the entire mortgage at the end of the agreed term.
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| Investment Backed.
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| This is very similar to an interest-only mortgage, except that you agree to invest the money saved in a policy such as an equity plan etc.
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| Part And Part
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| You can combine both interest only and repayment mortgages, usually for a set period each for the duration of the mortgage.
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| Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. This is a general guide and should not be taken as any recommendation. Suitability of a mortgage will depend on your personal circumstances. Please seek appropriate Expert advice before relying on them. They are subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.
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