Quick Enquiry
CAPITAL AND INTEREST REPAYMENT
The payments on this type of Mortgage are usually paid monthly. The payments include two elements which are repayment of the Capital you have borrowed (i.e. the mortgage loan) and the Repayment of the interest on the loan.
The monthly payment is calculated taking both the payment of the Capital and interest into consideration. From this a monthly figure is calculated. The repayment is recalculated every time there is a change in interest rates. This would not be the case with some of the special mortgages. See under “Types of Mortgages”.
In the early years most of each payment goes towards paying the interest and a smaller part goes towards paying off the balance of the loan. As times elapses then more of the payment goes to paying off the Capital and in the last years nearly all goes to paying off the balance of the loan.
The size of the payment you make each month is dependent upon the size of the loan, the number of years the mortgage is taken out over and the interest rate.
The Lender may insist that you take out life cover that will pay off the Mortgage in the event of death. If not it is advisable to consider it as a precaution in any event.
INTEREST ONLY (ENDOWMENT, ISA , PENSION)
An Interest Only Mortgage is quite simply repaying monthly, the interest on the loan. The Capital is repaid to the Lender at the end of the loan period and not during as with a Capital and Interest Repayment Mortgage.
The Lender in most cases will grant this sort of loan on the condition that you have an investment plan that will repay the Capital at the end of the loan period. It is your responsibility to ensure that one is in place and that it will meet the repayment of the loan in full when it is due.
At the end of the period of the Mortgage the Lender will demand repayment of the Capital. If you cannot repay the Capital at that time the Lender will take steps to recover it. This could lead to you having to sell your home to repay it.
The three main savings plans that are acceptable to them are Endowment (sometimes referred to as Low Cost Endowment), Individual Savings Accounts (ISA) and Pensions.
Endowment Policies have life cover built in that pay the Mortgage off in full should you die before the Mortgage is repaid. With ISAs and Pensions, the Lender may insist on life cover being taken out and if not, it is advisable to consider it as a precaution.
