Mortgage
A mortgage is often the largest financial commitment most people will ever make. Buying property can be stressful and time-consuming, and a mortgage application today is no longer simply about accepting one loan offer. It is about finding and selecting the most suitable mortgage terms.
Banks, building societies and smaller lenders all compete for your business, offering products with different interest rates, fees and added features to attract borrowers.
The main repayment methods are repayment mortgages and interest-only mortgages. In some cases, the two can also be combined.
Repayment mortgage
With this method, your monthly payment includes both capital and interest. Over time, the amount you owe reduces. In the early years, much of each payment goes towards interest, so the outstanding balance usually decreases more slowly at the start.
This approach can ensure the mortgage is repaid by the end of the term, provided all payments are made in full and on time.
Interest-only mortgage
As the name suggests, with an interest-only arrangement you pay interest on the amount borrowed, while the capital remains outstanding at the end of the term. This usually means you need an investment or repayment strategy to build up enough funds to repay the mortgage balance in future.
Traditionally, life assurance-based products were commonly used for this purpose, although some clients now use tax-efficient savings such as ISAs or pension arrangements to build towards repayment.
The information above is for general guidance only and does not constitute personal investment advice.
Your home may be repossessed if you do not keep up repayments on a mortgage secured on it.