Mortgage Repayment

There are two main options: a repayment mortgage, or an interest only mortgage. Sometimes, it is possible to combine the two. Here's how they work.

Repayment Mortgage
A repayment mortgage works in the same way as most types of loans. You make a regular monthly payment to the lender, and the payment is made up from capital (i.e. repaying the money you've borrowed) and interest. So, providing you keep up the appropriate payments, at the end of the term you will have repaid the loan in full.

Interest Only Mortgage
With an interest only mortgage, you pay only the interest to your Lender. This means you need to make a separate payment into some sort of savings plan, so you can build a lump sum to pay off the mortgage at the end of the term. The three main types of savings plans are: endowment policies, ISAs and pension plans. Whichever savings plan you choose, it is vital you keep up the contributions and also make sure your policy is regularly reviewed to ensure it is on target to repay the mortgage at the end of the term. It is important to remember that these types of investment are long term commitments and are unsuitable for people who might not be able to maintain their payments until the end of the term.

Combination Mortgage
Some Lenders may allow you to combine both repayment methods. For example, if you took out an interest only mortgage for your first home for £100,000 and you are looking at purchasing your second home at a cost of £150,000, you may want to keep your existing savings plan until the policy matures but borrow the additional amount as a repayment mortgage.

One of our Personal Mortgage Advisers will help you through the process step-by-step, working out how much you can borrow, how much it will cost, and what type of mortgage may be most suitable for you.

They will even take care of all the mortgage paperwork for you, so you don't need to worry about a thing.

Call one of our Advisers now: 0800 0850118