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Mortgage? Remortgage? Contact this mortgage specialist for the best deal for you. No fee option Types of Repayment: Repayment or Interest only? There are two basic ways of paying off a mortgage: repayment and interest-only (backed by a separate investment):- Repayment mortgages With a repayment or capital and interest mortgage, you pay your lender a monthly sum, which is partly repayment of the outstanding debt and partly interest on the outstanding loan. Month by month the debt reduces. Every time you move home or remortgage, you have to take out a new loan, and start your repayments from scratch. However, providing you make all your monthly payments in full, the loan will be paid off at the end of the agreed term (which is usually 25 years, but could be longer or shorter). Pluses:- · Easy to understand. · Loan guaranteed to be repaid if all payments made. Minuses:- · Very little capital is repaid in the early years of the loan. · Monthly payments higher than for an interest-only mortgage. · Life assurance is not included.
Interest only mortgages As the name suggests, you simply pay interest to the lender during the course of the loan. Your debt never reduces and at the end of the agreed mortgage term you owe your lender exactly the same sum as at the outset. Monthly payments to your lender are lower than for a repayment-type mortgage, but you will have to clear the debt at the end of the term. You will need to have to identify how you will repay the loan at the end of the mortgage term. This could be done in several ways including an Endownment Policy, a Pension, and Sale of Property Pluses · Payments are lower · Can be tax efficient Minuses · Your investment may not perform well enough to pay off all the mortgage at the end of the term · You may be diverting funds from what they were originally intended for (e.g. a pension fund is designed to give you a pension!) Find out the different Types of Mortgage Or Click here for mortgage advice
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