Rate Options

The two main types of mortgage repayment styles available today are Repayment or Interest Only.

The repayment option is sometimes referred to as a capital and interest mortgage because that exactly how it works. With each monthly payment you make you are repaying a small part of the loan (capital) and interest on the loan. It is a simple, clear approach and you can see your loan reducing as the years go by. However, in the early years most of what you pay back each month is interest. The monthly payments are more expensive but you have the security of knowing that your mortgage will be fully paid off at the end of the mortgage term.

As the name suggests, with an interest only mortgage your monthly payments will cover only the interest on the loan. Because you are not paying off any of the original loan borrowed your loan will not decrease over the years and at the end of the mortgage term you will still owe the same amount that you borrowed. This means that you need to ensure you have a suitable investment plan in place, such as an ISA or pension, to repay the loan at the end of the mortgage term - otherwise your home may have to be sold to repay the lender.