Mortgages

The following is general mortgage information that should be provided to you when you arrange a mortgage or remortgage.

Explanation of Repayment Types

Capital and Interest
This means that each monthly payment that you make to the lender will contain an element of capital in addition to the interest payable on the loan. The proportion of each will change throughout the period of the loan. The proportion of capital increases with each monthly payment provided that the payments due are met in full and on time.

Interest Only
As the name suggests, you pay only the interest each month. The actual amount borrowed doesn't reduce during the life of the mortgage and the full amount of the loan remains outstanding to be repaid at the end of the mortgage term. Your monthly payments to the lender are therefore less than with a repayment mortgage, but it is very important to ensure that you have the money available to repay the loan at the end of the term or on your death within the term of the loan.

To provide money to repay the capital borrowed at the end of the mortgage term, it is important to take out some kind of investment plan. If you choose the interest only option, you will need to consider an appropriate investment vehicle for your circumstance, for example an endowment policy, ISA or Pension Plan. Remember, you may also need to look at your life cover arrangements to be certain they are sufficient cover the mortgage too.

It is your responsibility to maintain the monthly premiums to ensure continuity of the repayment vehicle and to carry out regular reviews to ensure that the performance is sufficient to repay the loan upon maturity.

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