Repayment Mortgage

A Repayment Mortgage guarantees your loan is paid off in full at the end of the agreed term. You make monthly payments that cover both the interest on the loan and the repayment of the loan itself. This brings the peace of mind of knowing that you are reducing your debt every month. A repayment mortgage offers the reassurance that once the final payment has been made you will have repaid the mortgage in full (providing no payments have been missed). A term assurance policy can be used to repay this type of mortgage if you die before the end of the mortgage term.

Interest Only mortgage

With an interest-only mortgage you only repay the interest on the loan and none of the outstanding debt until the end of the term.

Your monthly repayments are usually made up of three parts:

• - Interest on the capital you owe the lender
• - Life insurance
• - Contribution to an investment plan designed to pay off the outstanding capital at the end of the mortgage term

Interest-only mortgages usually have lower monthly payments than their repayment mortgage counterparts, but are inherently more risky. There is no guarantee that the investment plan you choose will generate sufficient capital to pay off the outstanding debt at the end of the mortgage term. However, should your investment be successful, you may be able to pay off your debt and have a lump sum left over, or even clear the debt in advance of the expected date.

Your home may be repossessed if you do not keep up repayments on your mortgage.

The FSA does not regulate legal advice or some forms of mortgage.

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