Different Ways To Repay Your Mortgage


When repaying your mortgage, there may be one solution that is better for you than others. There are three different ways you can arrange repayment of a mortgage, with each varying in the way repayments are structured…

Repayment Mortgage

This is the most popular method of mortgage repayment, and is widely available via different mortgage providers. Monthly repayments are made for an agreed term until both the capital (money borrowed) and interest has been repaid. You must decide which type of repayment method is right for you. This could involve having the interest rate fixed over a set period or having a variable rate, which can change more fluidly. When you start your mortgage, the repayments will mainly be comprised of interest, which means should you wish to move house within a few years, the owed amount in terms of the actual capital will not have reduced by a great deal.

Interest-Only Mortgage

With these mortgages, you will only pay back the interest due on the amount you borrowed each month, meaning at the end of the term, you will still owe the full amount that you originally borrowed. Your monthly payments will be much lower than repayment mortgages, as you are only paying off the interest, however you will need to plan for how you will repay the loan at the end of your repayment term. It is quite rare to find interest-only mortgages, and if you do, lenders will have strict criteria for you to meet such as a good deposit and an approved repayment method in place to pay off the capital at the end of the term.

Combined Repayment and Interest-Only Mortgages

Some lenders may offer a combined version of the previous two mortgages, meaning that at the end of the repayment term, there will still be some of the mortgage capital which needs to be repaid. The precise rules will vary per lender.

If you are unsure about which type of mortgage you should take out, please get in touch. Our experience mortgage advisers will be happy to help you choose the perfect product.