Repayment Types
There are only really two basic types of mortgages UK that are available, and this is determined by repayment type. Although there are many different types of mortgages on offer, they will fall into two main categories- repayment only and interest only. Repayment only is the more popular type of mortgage, where with each payment you pay back a portion of the sum borrowed and the interest that has accrued upon it. Once you have reached the term of your mortgage, so long as you have kept up your repayments as agreed, you will owe nothing and will own your property outright.
The interest only mortgage is a type of loan where, as the name suggests, with each payment you simply pay off the interest that has accrued upon it, but without clearing any of the capital borrowed. This means that you will need to accompany your mortgage with some form of investment product in order to enable you to repay the capital borrowed at the end of the term. Investments can take the form of an ISA, an endowment or a pension.
As well as making your interest repayments you will also need to pay into your investment fund simultaneously. The idea with the interest only mortgage is that by the end of your mortgage term you will have acquired enough money to repay the capital that you owe whilst also having a surplus left over. There is, however, an element of risk with this type of mortgage, and you must bear in mind that if your investment is unsuccessful then you could risk losing your home at the end of your mortgage term. If you are interested in taking out an interest only mortgage then you should consult an independent financial advisor.
Once you have decided which sort of mortgage UK best suits your personal requirements, you then need to make further decisions about type and interest charges. Learn more by following the links.
