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Repayment Options

There are three man ways of setting your mortgage up, although a fourth is described here as well.

Your monthly mortgage payment will be part interest and part repayment of capital (loan). In the years much of your payment will be interest as a portion is loaded at the start, however, in later years your payment will be made up more and more of capital (loan) and will reduce at a faster rate. A repayment mortgage offers the reassurance that once you make the final payment the debt is totally cleared, assuming you have made all of the payments required.

Interest Only
You pay interest only for the term of the mortgage, thus never reducing the debt. Normally you would pay into some form of investment/savings scheme to produce a sum at least equal to the original mortgage amount to be able to pay off the mortgage at the end of the term. This typically would be an ISA, Pension Plan or Endowment. This mortgage offers potentially more flexibility for people moving house regularly.

Split/Combined Mortgage
You may combine an interest only mortgage with a repayment mortgage. You may already have an investment contract in place for some of the debt but wish to set up a repayment style for the remainder.

Investment backed mortgage
You may wish just to pay the interest on your mortgage and rely on an Inheritance or sale of other property or assets to pay off the mortgage at some time in the future. A portfolio if investments/savings could be determined in this instance.

What Repayment Term?
Normally this set at outset at 25 years, however, differing terms dependant on your budget can apply. The shorter the term, the higher the repayments will be. It also advised, where ever possible to ensure repayment of your mortgage before your normal or desired retirement date

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Nicholas Hall is an adviser with Julian Harris Mortgages Limited who are authorised and regulated by the Financial Conduct Authority. Your home may be repossessed if you do not keep up payments on a mortgage or loan secured on it. Written quotations available on request. All loans are subject to status. Some loans may require assignment of life assurance. Residential Mortgage transactions will not incur a broker's commission fee. THE STERLING EQUIVALENT OF YOUR MORTGAGE UNDER A FOREIGN CURRENCY MORTGAGE MAY BE INCREASED BY EXCHANGE RATE MOVEMENTS. Think carefully before securing other debts against your home.

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