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Mortgage Types

On this page of our site we will explain the main types of mortgages available and the potential advantages and disadvantages of each.

Repayment Mortgages

Also known as capital mortgages, repayment mortgages are the traditional means of paying for a property so that eventually it becomes fully yours as a result of the payments. The term of a repayment mortgage is typically although not necessarily 25 years and at the end of that period you would, if payments have been kept up, owe nothing to the lender.

Your mortgage payments are divided into capital repayments which are repayments of the money you borrowed and interest payments which are repayments of the interest charged for the loan.

Every month you pay off some of the interest and some of the capital. The monthly repayments on a repayment mortgage will be greater than an equivalent interest only mortgage.

Interest Only Mortgages

As the name suggests with an interest only mortgage you are only paying off the interest on the loan. The capital remains unpaid.

Typically, interest only mortgages run alongside an investment. The idea being that the investment is used to pay off the mortgage at the end of its term or even provide a surplus.

The danger with this type of mortgage is that if the investment is unsuccessful there could be a shortfall in the amount necessary to settle the mortgage. This could in some cases result in losing your home.

Proof of investment is no longer required by the majority of lenders for interest only mortgages.

To understand how mortgage interest works and what it means in terms of costs to you please visit our mortgage interest page.


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Address: Deedale, 6 The Paddock, Heswall, CH60 1XJ Tel: 0151 342 5234 Email: Principal: Stuart Peters.

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The guidance and/or advice contained within this web site is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK