Repayment Options

How you repay your mortgage depends on your circumstances and how long you will own the property that you are buying. There are two basic ways to repay what you have borrowed and these are explained below.

Repayment (Capital & Interest) Mortgages

Monthly payments are made over a set number of years (the Mortgage 'term'). These payments gradually repay all the capital borrowed as well as the interest. The mortgage is guaranteed to be repaid by the end of the term.
It's a straightforward and flexible method as you can often negotiate to reduce or increase payments each month if your circumstances change.
You will, however, have to take out separate life assurance to make sure that the loan is repaid in case you die before the end of the term.

Interest Only Mortgages

Here, your monthly repayments only pay off the interest on the loan, not the capital. Separate payments are made each month into a saving scheme like an endowment policy or an ISA which you have to make sure will pay off the capital at the end of the mortgage term.
The risk here is that you may not be able to repay the loan in full at the end of the term if the investment does not achieve sufficient value.

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