There are many different types of mortgages currently available in today’s market. You can find out more information about these products by contacting a mortgage adviser or by visiting your local bank or building society.
A mortgage can be paid back in the following ways:
• Repayment Mortgage
• Interest Only Mortgage
• A combination of the above two options
Repayment Mortgages
A repayment mortgage means that each month, your payments to the mortgage lender go towards reducing the amount of money you owe, whilst paying off the interest they charge. Therefore, as each months passes by, you are paying to reduce the overall mortgage loan including the interest.
A repayment mortgage is the simplest approach to paying your mortgage loan. However, during the beginning / the first few years, your payments will be mainly interest charged by the lender. Therefore, if you decide that during this period you would like to repay the mortgage or move house, you will find that the amount you owe will not have decreased very much.
Click here for more information.
Interest Only Mortgages
An interest only mortgage means that each month, your payments to the mortgage lender only cover the interest that they charge. Therefore, you are not decreasing the amount you owe in terms of the overall loan. It is because of this that it is very important for anyone taking this option that they find another way to repay the actual loan at the end of the term. This can be done through investments or by setting up a savings plan.
As you would only be paying off the interest of the loan and not the actual loan itself, the monthly repayments will be lower than if you were to choose a ‘Repayment Mortgage’.
However, the actual ‘debt’ is still needed to be settled. So, as stated above, you will need to find alternative ways to fund this ‘debt’ at the end of your loan period. If, for some reason you cannot repay the loan, you could lose your home.
Please Note: If you choose this option, you will need to make sure that your investment or savings plan operates and grows accordingly so that at the end of the term, you will have enough money to pay off the original mortgage loan. If things do not go as planned, it is important that you have other avenues, which you can explore to assist in paying off the loan.
Click here for more information.
