Types of Mortgage
Mortgage information & options
Repayment mortgages
A repayment mortgage is repaid by paying the lender a set sum each month which will gradually pay off the loan and the interest that you are charged on it. As time goes on, the amount that you owe your lender reduces. Each time you move, you have to take out a new mortgage and restart your payments from scratch.
If you ensure that you pay all of the agreed payments, you will normally pay off your mortgage at the end of the agreed term. This is usually around 25 years.
The advantages of a repayment mortgages are that they are simple and that your loan will get repaid. The disadvantages include the fact that you will be unlikely to pay off much of the actual debt in the first few years of repayment. Also, you will usually have to pay much higher repayments then you would if you had an interest-only mortgage. You will also need to arrange a separate life assurance policy.
Interest-only mortgages
With an interest-only mortgage, you simply pay your lender interest on the money that you have borrowed. You will not pay off the actual debt that you owe and you will owe your lender the same amount at the end of the mortgage as you did at the beginning. While your repayments will be a lot lower than if you had a repayment mortgage, you will have to pay off the entire debt that you owe at the end of your mortgage term. To pay off your mortgage you will have to contribute to a separate investment fund which will be used to pay off the mortgage at the end of the term.
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