"Friendly, helpful, put us at our ease, really easy to talk to"
Mr & Mrs C., Tipton, West Midlands
First Time Home Buying Guide - Page 4 of 11:
There are two main types of mortgage repayment methods, a Capital Repayment Mortgage and an Interest Only Mortgage, both of which we'll discuss in more detail below...
The Repayment Mortgage, also known as a Capital Repayment Mortgage, is one where you make regular monthly payments which is made up of part capital (i.e. the sum you borrowed) and interest.
So provided you keep up your contractual payments, your mortgage is guaranteed to be repaid in full at the end of the term. In the early years your payments will consist primarily of interest, and as the mortgage term progresses, the interest is charged on a decreasing amount of capital, and as a result, the proportions of interest and capital shift. Thus towards the end of your mortgage term, these payments will be of a higher, and increasing portion of capital.
With an Interest Only Mortgage you pay only the interest to the lender. This means at the end of your mortgage term the capital you originally borrowed will still remain. Accordingly, you must have some plan to repay the capital by the end of the mortgage term.
Until the mid 1990's Endowment Mortgages had been a very popular way of building up a capital sum to repay the mortgage, although since this time investment returns have largely meant that the maturity values of endowment policies have been insufficient to repay the mortgage balance, and many borrowers have had to make alternative arrangements to repay the shortfall.
Other linked investments have included ISA Mortgages and Pension-linked Mortgages, although both have proved to be quite restrictive for one reason or another.
Of course the way in which you choose to repay your mortgage and the type of interest rate you select depends on personal circumstances and this is where a qualified adviser will be able to help. How the monthly repayment to the lender is organised will depend on the type of repayment method selected.
For more information on mortgage repayment types, please check out the following pages in our Mortgage Glossary.
So, hopefully you've got a bit more of an idea about the different types of repayment methods for your mortgage.
You'll undoubtedly now be curious as a first time buyer as to whether you'll need to provide a deposit or not, so we'll take a look at that next.
As a first time buyer, do I need a deposit? NEXT ›
The overall cost for comparison is 9.8% APR.
The actual rate available will depend upon your circumstances. Ask for a personalised illustration. APR variable and based on a usual case. Most customers are likely to receive a lower rate or the same rate as our overall cost for comparison rate - learn more about APR.
There are no upfront broker fees.
However, a fee may be charged on successful completion. An indication is that on conforming cases (straightforward applications with no or minimal adverse credit) a fee may be charged of up to 1% of the amount advanced, typically £795 and will depend on your circumstances.
For non-conforming cases (where case research and processing may be more complex due to adverse credit or unusual circumstances), a fee may be charged of up to 3% of the amount advanced, typically £1,995.
THINK CAREFULLY BEFORE
SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED
IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
Adding existing debt to your mortgage will increase the repayment term and overall cost.
Over £2,000 worth of Argos Vouchers to be won in the Shire Direct Grand Prize Draw 2008! Terms and conditions apply - please read article for full details.
Claim £100 worth of Argos Vouchers upon completion of your transaction throughout 2008. Terms and conditions apply - see our Vouchers Special Offer page for full details.
Shire Direct and Shire Direct Mortgages are trading styles of Shire Processing Centre Limited which is
Authorised and regulated by the Financial Services Authority in respect of regulated mortgage products and general insurances.
Registered No: 302389. Commercial funding and Secured Loans are not regulated by the FSA.
Licensed Credit Brokers. Consumer Credit Licence Number: 349999.
Shire Processing Centre Limited is registered under the provisions of the Data Protection Act by the Information Commissioners Office: Registration No: Z6795249. Registered in England & Wales. Company number: 2732202. Telephone calls may be recorded for training, monitoring and security purposes. All applicants must be aged 18-years or over.