WAYS TO REPAY (Types of repayment)

Repayment mortgages - Also known as Capital & Interest Mortgages because an element of capital is being repaid each month as well as interest. In the early years very little capital is being paid off but as time goes by more of the monthly payment repays the capital and less to interest. This type of mortgage guarantees that the loan is repaid at the end of the mortgage term provided that no payments have been missed. There is no built in life cover or investment involved in this type of mortgage.

Interest only mortgage - Only interest is paid to the lender therefore the amount owed on the mortgage remains the same. Usually an investment plan is linked to the mortgage such as an ISA or endowment policy which aims to repay the mortgage at the end of the term. The plan usually has built in life cover and is portable from one house to the next, however the amount of investment return is not guaranteed. This means that this type of mortgage has an element of risk involved in that there may not be sufficient money in your savings to pay off the whole mortgage.

Part & Part - Part of the mortgage is on Interest only, which could be due to an existing investment policy and the remainder is on a repayment basis. This is a combination of the above methods.