A mortgage can be taken on two different repayment methods; repayment or interest-only.

Repayment mortgage:

A repayment mortgage provides the reassurance and peace of mind of knowing that you are reducing your debt further with every payment that you make.

The way this works is that the monthly mortgage payments cover the interest and capital, and are calculated to ensure that the mortgage would be completely repaid at the end of the mortgage term.

Interest-Only mortgage:

With an interest-only mortgage, the monthly payments only cover the interest on the mortgage; therefore, the outstanding capital balance remains exactly the same and is not repaid until the end of the term.

The monthly cost will only change if the interest rate changes, although the monthly payments for interest-only mortgages are usually lower than the monthly payments for a repayment mortgage.

 A separate repayment vehicle (e.g. ISA, endowment, pension plan etc) is required to ensure that the capital can be repaid at the end of the mortgage term.

While there is no guarantee that the investment plan that you choose will provide enough capital to pay off the outstanding debt at the end of the mortgage term, there is also the potential for you to be able to clear the debt in advance of the expected date, or even pay off your debt and have a lump sum left over, should your investment be
successful.

If you would like more information about this or any other mortgage product offered by Cook Allen & Associates, please call 0845 257 9301, or complete our brief questionnaire and one of our qualified mortgage advisers will get in touch to discuss you mortgage requirements.