Difference between repayment and interest only

There are many schemes offered by mortgage lenders from which you as a prospective borrower can choose.

These can be divided into two broad methods of repayment:

Capital and Interest method: – 
With a capital repayment mortgage, the capital and interest elements of the loan are paid off with each monthly installment, with the balance reducing over the length of the loan.

Therefore by the end of the mortgage term, assuming all mortgage payments are made, you have paid off the balance in full and you therefore own your property outright.

Interest only method: – 
With an interest only mortgage the balance of your mortgage stays the same throughout the mortgage term. Interest and usually a premium in a suitable investment vehicle are paid monthly.

At the end of the term, the proceeds from the investment vehicle are intended to repay the mortgage. This amount will depend on the performance of the investment vehicle.

If you do choose an interest only mortgage you are responsible for ensuring that you have sufficient funds available to repay your mortgage at the end of the term.

If you need any more information, then simply speak to an expert today.