Mortgage Guide
There are two main types of
mortgages available to the UK resident and below we have
broken these down into the types of mortgage and also the
various options available regarding how the interest is
calculated on a particular mortgage. We have included a
small piece of information about each one. Please do not
hesitate to contact us for more information.
Types of Mortgage
Repayment mortgage
- This is where each month the payment made to the lender
pays back some of the interest on the loan and some of the
capital of the loan of the mortgage so that eventually you
will have no debt left to pay at the end of the term of the
mortgage.
There are both advantages
and disadvantages to a repayment mortgage.
The advantages
of this form of mortgage are that at the end of the term of
your mortgage you know that the total amount of the debt has
been totally repaid. Overpayments and lump sum payments paid
into your mortgage account can be made which will reduce
both the interest and capital amounts repayable. Life
assurance cover is not always necessary in taking out this
type of mortgage.
The disadvantages
of a repayment mortgage are that there can sometimes be
financial penalties for making lump sum or overpayments into
your mortgage account. In the early years of a repayment
mortgage the majority of the monthly repayment is interest
rather than capital. For borrowers moving house regularly,
this can result in very little of the capital being paid
off. If you have no life assurance cover in place and die
before the loan is repaid, the mortgage will still need to
be repaid. This may result in the property having to be sold
to repay the debt owed.
Overview
of mortgages |
