Repaying Your Mortgage... ?
There are fundamentally two types of Mortgages..
INTEREST ONLY and CAPITAL REPAYMENT.
Interest only.
An Interest only mortgage is were the borrower only pays back the interest being incurred on the mortgage balance. This means that when the mortgage term has come to an end the borrower will still owe the mortgage balance. There are a variety of repayment vehicles which can run along side interest only mortgages which aim to repay the mortgage at the end of the term see below:
Capital Repayment (Equity Repayment)
With this type of mortgage the loan is taken out over a period of time called the "Term", traditionally 25 years. Each month part of the monthly payment is paid towards the Capital (or balance of the loan). This guarantees to, at the end of the Mortgage Term, have repaid the mortgage, so long as all payments have been made, naturally.
Endowments.
An Endowment has two main elements - Life assurance - a payout on death which should be the value of your mortgage or greater or an Investment element which is to provide a return at the end of the term, however this depends on the investment performance.
There are several different types;
With Profit Endowments.
Unit Linked Endowments.
Low Cost Endowments.
Low Start Endowments
Low Cost Low Start Endowments.
Your circumstances and projected situation will define which of these would suit your needs the best. However, fundamentally they are reliant upon the "fund" performance as to their value when they mature. It is advisable to consult your Independent Financial Advisor (IFA) regarding this very important subject. We can of course help you in this area by recommending you to our associates who are experts in this field.
Other Repayment methods.
There are various other repayments methods other than the traditional above.
- These include Pension linked mortgages. Here the tax free lump sum that is available when your pension becomes available can be used to repay the mortgage.
- ISA. or PEP's or TESSA. These efficient saving methods can be utilized to repay the loan as well.
In either case there is generally a minimum requirement of Life Assurance. This provides cover in that, in the event of a persons premature death, sufficient funds will be made available to repay all or part of the loan. There are several different types available depending upon your circumstances and it is advisable to consult your Independent Financial Advisor (IFA) regarding this very important subject. We can of course help you in this area by recommending you to our associates who are experts in this field.
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