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Taking out a mortgage is a pretty big step, whether it's your first or you're moving up the property ladder. As the most sizeable loan you'll ever take out, choosing the right type is essential. The choice, whilst at first glance may seem bewildering, is not as complex as it appears. Essentially, there are two key types of mortgages - repayment and interest only. Once you've identified the way in which you want to repay the money lent to you, narrowing down the choice becomes easier. It is simply the case of finding the best deal.
You will pay your mortgage in monthly instalments, but first you need to decide which option will suit your needs, and what you can realistically afford.
| Repayment | Interest Only | |
| How it works | You pay some interest and capital off each month, and the capital reduces over time. | All you pay the lender each month is the interest on the amount borrowed. At the end of the term you will need enough funds to pay back the amount borrowed. It is usually recommended that you make a separate payment each month on top of your mortgage repayments into a savings scheme to build up the sum needed to pay off the mortgage at the end of the term. |
| Benefits | There are no hidden surprises. At the end of the term, providing you've kept up with repayments, you're guaranteed to pay off your mortgage. You can choose how the interest is added to your loan, see 'know your rates'. | Your monthly payment is lower than repayment mortgages. Your investments may perform well, giving you surplus cash after paying off your mortgage. You can choose how the interest is added to your loan, see 'know your rates.' |
Know Your Rates
We generally charge a fee for advising and arranging your mortgage. We also get paid a procuration fee from the lender. In exceptional circumstances, the initial fee payable may be more or less than the fees detailed above. If this happens, we will explain the actual amount payable and the reasons why the fee is different. Once agreed, and before providing any services to you, we will confirm the actual total fee payable in our "Information about our mortgage and insurance services" document.
Your home may be repossessed if you do not keep up repayments on your mortgage.