A look at Repayment Mortgages and how the Repayment Mortgage works, plus available help from Shire Direct!
A Repayment Mortgage is one of two methods in which a borrower is able to repay his mortgage, the second type is an Interest Only Mortgage.
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Here we take a more detailed look at Repayment Mortgages, and how they work, and how they compare against the other method of mortgage repayment, the Interest Only Mortgage. We also discuss how we can help you with your mortgage requirements whatever your circumstances!
Table of Contents:
Repayment Mortgages explained
So as we discussed above, the Repayment Mortgage is one of two possible ways in which a borrower can repay their mortgage, the other way being an Interest Only Mortgage.
You might find it useful to know that Repayment Mortgages are also termed as:
- Capital Repayment Mortgage
- Capital and Interest Mortgage
- Annuity Mortgage
The Repayment mortgage is geared to pay-off both the capital sum and the interest charges by the end of the term of the mortgage, and it is the only method that guarantees the certainty of repaying the mortgage, provided of course all contractual repayments are made.
How does the Repayment Mortgage work?
With the Repayment Mortgage, each monthly instalment will contain a portion of capital repayment and a portion of interest charged. In the early years of the mortgage, the amount of capital repaid will be very small, as most of the repayment will be interest charges.
As the mortgage term progresses, a larger portion of the monthly instalment will be repaying your capital, although the monthly repayment remains the same (assuming of course interest rates remain unaltered), until the final few years, when the bulk of the repayment will be paying back the capital borrowed.
Should I choose a Repayment Mortgage or Interest Only?
Naturally, this will depend on your circumstances and aspirations. Most people looking to buy a property on mortgage are looking at the activity as a reasonably long-term commitment, and will require some form of stability. As a homebuyer, you will have a strong desire to discipline your budgetary activity, with the prime intention of "looking after the roof over your head", and you are likely to require the certainty that your mortgage will be paid off at the end of the term. The repayment mortgage will guarantee this.
However, at Shire Direct we understand that individual circumstances, needs and aspirations will differ. And it may well be that an Interest Only mortgage will be more appropriate, at least in the shorter-term! Take for example the case of young professionals struggling to get onto the property ladder. Often during the course of qualifying for entry into the professions, salaries are notoriously low. For example solicitors, doctors, nurses, accountants, architects etc. will for many years during their training receive substantially less than when they have qualified. They may need to keep their mortgage payments as low as possible during this period, and then convert their borrowings to a repayment basis once their salaries have substantially increased.
Their are other circumstances where an Interest Only option may be appropriate, and these include:
- If the borrower has an investment vehicle running alongside the borrowings which is designed to repay the capital element at maturity
- Intention to sell the property and down-size towards retirement
- If the borrower is retired and requires to raise cash
- If there is a potential lump sum in the offing, for example a likely inheritance or compensation claim that will be sufficiently large to repay the capital element
I'm interested in a mortgage, but I need more information. What's my next step?
Simply Contact Us!
So, if you are thinking of applying for a mortgage or remortgage, and you are uncertain as to the benefits of a repayment mortgage over an interest only option, then please contact one of our professionally qualified mortgage advisors on Freephone 08000 282 281, our lines are open seven days from 8am until 10pm. You may prefer to enquire online at any time instead. In either instance, we'll provide you with a rapid in-principle decision, naturally without any obligation.
Whatever your circumstances, and whatever your needs, we'll carefully listen and assess your requirements, in a friendly and helpful way. Service and advice always come first at Shire Direct!
Well, we hope we've been able to explain the Repayment Mortgage for you and have answered any questions you may have had. You'll find lots more mortgage related information throughout our site, so why not sit back, relax, and take a little time out to explore the potential possibilities that may be available to you, and don't forget we're only ever a free telephone call or few mouse clicks away, and would love to hear from you!
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.
Are you worried and becoming stressed because you are having problems getting a mortgage or remortgage? Worry and stress no more! Here at Shire Direct we provide tailor made mortgage solutions to suit you, and can usually help with all kinds of circumstances including...
Remember, we're here to help, and would love to hear from you!
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