Repayment methods explained
There are 3 types of repayment method for your mortgage. They are each available subject to lender criteria and your personal circumstances. Below we have explained each one in simple terms. Our Consultants would be happy to discuss the options available in more detail on 01902 568800.
With a Capital and Interest Repayment mortgage, your monthly payment is split - some of it goes towards paying the interest on your loan, and some towards paying off the sum you have actually borrowed (known as the "capital"). The payments are worked out so that you will have repaid all of the capital just as the mortgage term, usually 25 years, comes to an end. In the early years you will be paying mostly interest on your loan, but in the later years more and more capital will be repaid each month.
It's important to note that a repayment mortgage does not rely on the performance of an investment to ensure that the money you have borrowed is eventually repaid. As long as you meet your monthly payments during the term, your loan will be paid off in full by the end.
If you do choose repayment, we recommend that you think about taking out life assurance cover.
If you choose the interest-only method, you do exactly that - pay just the interest on your loan every month. When the mortgage term comes to an end, you then have to repay in full the "capital" that you owe to the lender. This is usually done using a long-term investment such as an endowment/pension or if it is not your main residence then maybe through the sale of the property or other assets.
It is your responsibility to ensure that you have a suitable policy in place to repay the loan and that you pay the premiums direct to the product provider.
Part and Part
A combination of the above. For example, you may already have an endowment which can be used to repay part of your new mortgage. You could, therefore, arrange that part of the loan on an interest only basis and repay the remainder using the repayment method.
Should you decide to choose either an Interest Only or Part and Part mortgage then we will always supply you with a comparison quote for a Repayment mortgage.
Should you require advice on an investment vehicle we can provide you with a referral to a third party as we do not give advice on these products.
Your home may be repossessed if you do not keep up repayments on your mortgage.
There will be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1% but a typical fee of 0.3% of the amount borrowed.
If however you arrange a mortgage on a property from one of our associated new homes developers, we will waive this fee.