Repaying your mortgage
- Repayment or 'capital and interest' mortgage
Similar to a personal loan, your monthly payment is made up of part interest and a varying proportion of the capital so the mortgage loan amount is gradually paid off year by year throughout the term of the mortgage. Provided you make all the agreed payments, the loan will be fully paid off by the end of the mortgage term.
- Interest only
The amount which you pay to the mortgage lender each month consists only of interest. The original amount that you have borrowed remains outstanding for the term of the mortgage and has to be repaid in full at the end. You will therefore need to build up a suitable capital lump sum over the mortgage term to repay this amount. It is your responsibility to ensure that you have enough money to repay the mortgage at the end of the term, otherwise you could lose your home. The ‘Repayment/Investment plans available for repayment of a mortgage’ are explained in the next section.
- Part repayment/Part investment backed
This is a combination of the two payment methods, where part of the original loan is fully repaid over the mortgage term, with the other part being based on an interest only basis with the capital sum remaining at the end of the term to be repaid from the proceeds of a repayment/investment plan or other sources.
