With a repayment mortgage, your monthly payments to the lender go towards reducing the amount that you owe as well as repaying the interest they charge. That means that each month you’re paying off a small part of your mortgage.
It’s a clear approach – you can see your mortgage getting smaller and provided you maintain the payments, you also have the certainty that your mortgage will be repaid at the end of the term.
Initially, the majority of your payments go towards interest on your mortgage, which means in the early years, the amount you owe won’t reduce by very much.
These mortgages are now only offered with very strict criteria and aren't available to everyone. With an interest only mortgage you only pay the interest charged on your mortgage, so you’re not actually reducing the mortgage itself. You’ll need to have a realistic and feasable arrangement in place to repay your loan at the end of the term for example - investments or savings plans. Most lenders will want proof of these.
If the savings or investment plan you chose performs well, then you could pay off your mortgage earlier compared to a repayment mortgage. At the full mortgage term there may be a lump sum available after the mortgage has been repaid.
ery few investments or savings plans are guaranteed to repay your mortgage in full. At the end of the mortgage term, you’re responsible for repaying the mortgage in full. If your savings or investments plan doesn’t cover the full mortgage you’ll be responsible for paying the difference. Your mortgage lender can demand repayment and they’ll charge you interest on any outstanding balance until it’s repaid. Lump sum payments or changing to a repayment mortgage may not be possible if your circumstances change and you can no longer afford the increased amounts.
It may be suitable for you to pay your mortgage by a combination of repayment and interest only.
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We will advise you on how much you can borrow.
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Your home may be repossessed if you do not keep up repayments on your mortgage. We do not charge fees for arranging your mortgage as we are paid by the lender. However, if you prefer, you can pay us a broker fee of up to 1.5% of the mortgage amount and receive the lender's fee yourself.