Mortgages are one of the largest single transactions in most people’s lives. Buying a property can be a stressful and time consuming experience, although nowadays the financing of a mortgage is a case of finding and selecting the most suitable mortgage, rather than simply accepting a lender’s offer.

Banks, building societies, and smaller niche lenders compete for your business, all offering a variety of interest rate deals, associated fees and other enhancements to attract borrowers.

The main methods of repaying a mortgage are capital and repayment and interest only. It is also sometimes possible to set this up using a combination of the two. A description of these methods is provided below.

Mortgage Types

Repayment Mortgage

Under the repayment method your monthly repayments consist of both interest and capital hence, over time, the amount of money you actually owe will decrease. In the early years your repayments will be mainly interest and therefore the capital outstanding will reduce slowly in the early years. This method ensures that the mortgage is repaid at the end of the term providing all payments are made on time and in full.

Interest-only Method

As the name suggests, with the interest only method you only repay the interest on the amount borrowed. At the end of the term the capital is still outstanding. Therefore you will usually need to take out some kind of investment policy to save up enough money to repay the mortgage at the end of the term. Traditionally the preferred product for repaying the capital of an interest only mortgage was a mortgage endowment policy (which included a set amount of life cover) – although more recently customers are using Individual Savings Accounts (ISAs) and pensions to build up a sufficient sum and taking advantage of the tax breaks offered by these products.

Trusted Mortgage Advice

Intelligent Adviser Ltd offers Trusted Mortgage Advice to help you make the right decision when it comes to mortgaging your home. Our experienced team of mortgage brokers will provide you with personalized advice and guidance to ensure you get the best deal. We specialise in finding the most competitive rates, managing all paperwork, and helping you understand the ins and outs of the process. With Intelligent Adviser Ltd, you can trust that you're getting the best mortgage advice available.