Repayment or Interest Only ?
Repayment
Also known as the Capital & Interest method, this mortgage does not rely
on investment performance to repay the loan. Each payment pays off some
capital, although in the early years, most of your payment covers interest.
Gradually, the amount owed reduces, until at the end of the loan you have
repaid the whole debt.
A life assurance is usually required to protect the outstanding debt in the event
of death, the sum assured being designed to reduce at the same rate as the loan.
It is quite common now for these policies to offer optional cover against
critical illness, permanent health cover and unemployment risks.
Interest Only
As the name suggests, each payment to the Lender pays only interest on the
loan. The amount you owe does not reduce until at the end of the term, an
investment product matures and pays off the debt.
Depending on your attitude to risk, the mortgage can be linked to an
endowment savings plan, a pension or a Personal Equity Plan (ISA).
Whichever product you use, it is important that you take professional advice in
deciding which route you take.
We can provide independent advice on your mortgage, life cover and investment
products.
