This type of mortgage is the most traditional. Part of your mortgage payment will go towards the money you have borrowed and the other part towards the interest. These are popular because that provided you have kept up with the monthly payments you are guaranteed to have paid off the loan by the end of the term.
Your payments remain the same every month and change only as the Bank of England raises or lowers the interest rate. During the early part of the repayment loan more of the instalment will go on paying off the interest than the capital. As time goes on and more of the capital is paid off so the amount of interest is reduced.
As with this type of mortgage you will be paying back both capital and interes the monthly payments to the lender tends to be higher than for interest only loans. Interest only loans do however, require payments to be made into an investment plan.
However, unlike a pension, ISA or endowment mortgage, repayment home loans do not give you the opportunity to benefit from a rising stock market. Also, when remortgaging, people often choose another 25 year repayment mortgage, to keep the initial monthly costs down. This means that the overall total period of your mortgage debts combined increases over time.
When taking out a repayment mortgage, make sure you check whether or not it is flexible. Many lenders have started to offer more flexible terms, and actively encourage borrowers to take control of their finances.
With a flexible repayment mortgage, the provider will usually allow you to make mortgage overpayments. In the same way, many lenders will also permit underpayments or repayment holidays at times when money is especially tight. If these flexible terms are not agreed at the start, any over or underpayments may incur hefty charges.
We can put you in touch with fees free mortgage brokers who will compare repayment mortgage and remortgages.
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