Mortgage Types
 

Capital and Interest (Repayment Mortgage)

Each repayment contains some capital and interest. In the early years, the monthly repayment is made up almost entirely of interest. There will be a gradual reduction in the amount of capital owing. This mortgage is guaranteed to be repaid in full so long as you make each repayment when it is due.

If you have any dependents it is a good idea to make sure that, in the event of you becoming seriously ill or dying, they can continue to live in your home. Life assurance cover, critical illness cover and mortgage payments protection insurance cover should be considered when making decisions about a mortgage.

Interest Only

With an interest-only mortgage, the borrower pays interest to the lender throughout the whole mortgage term and all the capital is repaid at the end of the mortgage term.

A long-term investment product purchased at the same time as the mortgage is taken out will normally repay the capital at the end of the mortgage term. A long-term investment product could be an Individual Savings Account (ISA), Endowment or Personal Pension.

The main advantage of an investment-linked mortgage is that you can enjoy the potential of stock market growth on your investment. This type of mortgage may not be suitable for borrowers who do not wish to expose themselves to an element of risk.

If you have any dependents it is a good idea to make sure that, in the event of you becoming seriously ill or dying, they can continue to live in your home. Life assurance cover, critical illness cover and mortgage payments protection insurance should be considered when making decisions about a mortgage. The basic cost of an endowment already includes some life cover.