Mortgages: Interest Only or Repayment Methods, Mortgage Services IOW

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Repayment

A repayment mortgage works in the same way as most other loans, You pay a regular monthly payment that covers the capital borrowed as well as the interest. Provided you always keep up the correct payments, at the end of the term you will have repaid the loan in full.

Interest Only

With this type of mortgage, as the name implies, you repay only the interest. The capital you owe remains constant throughout the mortgage term, In most cases lenders grant this type of repayment on condition that an investment vehicle is in place to repay the capital. Savings plans most commonly used are endowment plans, a personal pension or an ISA. Remember that if you use an investment to repay the capital at the end of the mortgage term, maturity values are not guaranteed and it is your responsibility to ensure that you have enough funds at the mortgage term to repay the loan. We can arrange further advice on these if required.