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For most of us, our mortgage is among the largest single transactions we ever undertake.
Buying a property can be stressful and time consuming at the best of times, and for some borrowers finding and selecting the most suitable mortgage for them can be a contributory factor.
Working with us means that you’ll benefit from informed advice from the outset, backed by up-to-date financial intelligence, and years of practical experience, to position a mortgage product that sits in line with your personal circumstances, objectives and attitude to risk.
Banks, building societies, and smaller niche lenders are all competing for your business, and offer a variety of interest rate deals, associated fees and other enhancements to attract borrowers.
The two most common methods of repaying a mortgage remain interest-only or capital and interest repayment. A description of these methods is provided below.
It is sometimes possible to set up a mortgage using a combination of both.
As the name suggests, with the interest-only method, you are repaying only the interest on the amount borrowed each month. At the end of the term, all the capital is still outstanding. Therefore you will usually need to take out some kind of investment policy to save up enough money to repay the mortgage at the end of the term.
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 customers have been using Individual Savings Accounts (ISAs) and pensions to build up the required capital sum, while taking advantage of the tax breaks offered by these products in the interim.
Repayment (capital and interest) Method
Under the repayment method your monthly payments consist of both interest and capital, hence, the amount of money you actually owe will decrease over time.
In the early years your repayments will mainly cover the interest due, and therefore in the early years the capital outstanding will reduce slowly.
This method ensures that the mortgage is repaid at the end of the agreed term, providing all payments are made on time and in full.
As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments