Repaying Your Mortgage Loan

You will need to select a method of repaying the loan, there are 2 main methods of repaying a mortgage.

CAPITAL & INTEREST

With this method you agree to repay the loan on a monthly basis over a specific term.

The monthly payment consists of 2 elements, capital & interest. Total monthly payments will remain constant, unless interest rates change, but as each year passes the capital element of the payment increases, whilst the interest element decreases. Providing that all monthly payments are met in full, throughout the term, there will be no capital outstanding by the end of the agreed term.

INTEREST ONLY

With this method, you agree a term paying only interest on the capital, the balance owed remains constant throughout.

You will need a separate investment to run alongside the loan, to generate an amount equal to the capital outstanding at the end of the agreed term.

There are three main types of investment plans used for mortgage repayment. These are Endowment, Personal Pension and Individual Saving Accounts. All options have no guarantee and can be affected by variations such as interest rates, stockmarket returns. It would be your responsibility to maintain regular payments in to such plans. We do not provide advice in relation to investment products.

The Financial Services Authority does not regulate some forms of secured loans.