Repayment Methods

Capital repayment

This is the most straightforward type of mortgage repayment method. The payments you make to the lender each month pay off both the capital and the interest from the loan. Provided you keep up the payments, you are guaranteed to repay the loan by the end of the agreed term.

The initial mortgage term is generally set to 25 years; however, this term is chosen by you and is dependent on affordability. The lender calculates your monthly payments depending on the amount borrowed, the term of the loan and the interest rate product you choose.

One of our advisers can help you make an informed decision, giving you the necessary advice essential to finding the most suitable mortgage for you. Please contact us to find out more.

Interest only

An interest-only mortgage is where you pay the lender (a bank or building society usually) the interest on the loan you've agreed. You don't pay the capital back until the end of the mortgage term.

For many people interest-only mortgages are better known as "endowment mortgages", "ISA mortgages" or even "pension mortgages", but strictly speaking these names describe an interest-only mortgage plus the method by which it is repaid.

The term of the loan normally matches that of your chosen repayment vehicle, as this in turn is calculated depending on the premium needed to build up the fund necessary to repay the loan at the end of the term. The lender will usually ask what type of investment vehicle you have chosen to repay the mortgage, just to make sure that it fits within their accepted criteria.

It is important to regularly check on the performance of your investment vehicle to make sure enough funds will be available at the end of the mortgage term to repay the loan.

Contact us to discuss your requirements.

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