Interest Only
As the name suggests, the repayments that you make to the lender cover just the interest charged on the amount you have borrowed and if you were to opt for this type of loan than all of your outstanding mortgage balance would fall due at the end of the mortgage term unless you have been paying into an investment plan such as an ISA, Endowment or Pension.
These plans or Investment Vehicles as they are sometimes known are designed to produce a lump sum at the end of the term that is at least large enough to repay your outstanding mortgage balance but generally there is no guarantee that the plan will do this which means any shortfall has to be made up by you. (see graph 2) So, if for example the plan used to repay the £80,000 mortgage in the table below only returned say, £75,000 after 25 years, you would need to find £5,000 to make up the shortfall.
This type of mortgage would suit someone with a more adventurous outlook.
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Repayment
This method of repaying your mortgage, sometimes known as capital and interest, is the most popular and means that your loan is guaranteed to be repaid at the end of the term as long as all of your mortgage repayments have been met. (see graph1).1
This is the type of mortgage would suit someone with a cautious outlook.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
We will charge a fee of £195.00 payable on completion of your mortgage. We may also receive commission from the lender.
The FSA do not regulate some forms of mortgage
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