Repayment (capital and interest) mortgages:

Under a repayment mortgage your monthly repayments consist of both interest and capital. Over time therefore, the amount of money you actually owe will decrease. In the early years your repayments will be mainly interest and therefore the capital outstanding will reduce slowly in the early years.

Whilst this method ensures that the loan is repaid at the end of the term providing all payments are made on time and in full, it is generally more expensive at the start.

Interest only mortgages

As their name suggests, with an interest only mortgage you only repay the interest on the loan. At the end of the term the capital you originally borrowed will still be outstanding. Therefore you will usually need to take out some kind of investment policy to save up enough to repay the loan at the end of the term or sell the property to repay the loan.

Traditionally the preferred product for repaying the capital of an interest only mortgage was a mortgage endowment policy (which included a set amount of life cover) – although more recently borrowers have used Individual Savings Accounts (ISAs) and pensions to build up a sufficient sum – whilst taking advantage of the tax breaks offered by these products.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

The Financial Services Authority does not regulate some forms of mortgages

There may be a fee for Mortgage advice. The precise amount will depend upon your circumstances and we will discuss your payment options with you and confirm the actual amount payable before we begin to provide our services to you.