Independent mortgage brokers | Mortgage advice

The two main ways to repay your mortgage are 'Repayment' and 'Interest Only'.

With a repayment mortgage you make monthly repayments for an agreed period (the 'term') until you've paid back the loan and the interest. This method guarantees to repay the whole loan as long as you maintain all payments as they become due.

Repayment mortgages are sometimes called 'Capital and Interest mortgages' or 'Traditional mortgages' but they all are the same thing.

The following picture shows how your mortgage will be repaid over the term.

With an 'Interest Only' mortgage, you make monthly repayments for an agreed period but these will only cover the interest on your loan. They do not repay any of the capital you have borrowed. This means you will still owe the same amount at the end of the mortgage period as you did at the beginning. You'll normally also have to pay into another savings or investment plan that'll hopefully pay off the loan at the end of the term.

There are two ways of repaying your mortgage: A Repayment mortgage or an Interest Only mortgage.

If you want a 100% guarantee that your mortgage will be repaid at the end of the term, then a tradtional 'Capital and Interest' or 'Repayment' mortgage is the method to chose. This method means that for each payment made, the cost of the interest is covered and a small element of the capital is repaid. As the capital repayment is made over the term, the balance is gradually reducing until the whole loan is repaid. For a 25 year term Repayment mortgage, the halfway point of repaying the mortgage is around year 17.

If you opt for an Interest-Only mortgage, and want to repay the mortgage by lump sum at the end of the term, you will need to build up a lump sum using an investment vehicle. If you do not have a lump sum at the end of the mortgage term, you may need to sell the property to repay the mortgage.You will owe the whole mortgage amount during the whole term and would need to save separately to build up a lump sum to repay the mortgage with.

Suitable investment products to build up a lump sum could include Endowment policies, Pension plans, Individual Savings Accounts (ISA's) and Unit Trusts and/or OEIC'S.

1st Call 4 Mortgages are not investment advisers, and therefore cannot advise on
repayment vehicles that could be used towards the repayment of a mortgage.

It is your responsibility to make sure you have enough money to repay the
mortgage at the end of the term, otherwise you could lose your home.

1st Call 4 Mortgages can advise which method is most suited to your needs
and circumstances, after we have assessed your individual requirements.