More Mortgage Info
Mortgages - How to repay your mortgage
There are two ways to repay the amount you have borrowed (the ‘c...
More Mortgage Info
Source of information – FSA – Consumer information




Mortgages - How to repay your mortgage
Advantage...
More Mortgage Info
repayments?          only payments for reduce the amount you pay each month into
                     a...
More Mortgage Info
mortgage –

You put your savings
                          taxes.

                          Choice – Y...
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Mortgage repayment v- Interest only
In sourcing your mortgage, I can confirm that Mortgage-Desk have ou...
More Mortgage Info
Continuation sheet :




Page6 of 7             Date 1/10/2007
More Mortgage Info




Page7 of 7     Date 1/10/2007
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Mortgages How To Repay Your Mortgage

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How To Repay Your Mortgage

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Mortgages How To Repay Your Mortgage

  1. 1. More Mortgage Info Mortgages - How to repay your mortgage There are two ways to repay the amount you have borrowed (the ‘capital’). Their advantages and disadvantages are described below. Repayment mortgage (also called a capital-and interest loan) Your monthly payments gradually pay off the amount you owe as well as paying the interest charged on the loan. Provided you make all the agreed payments, the loan will be fully paid off by the end of the mortgage term. Interest-only mortgage Your monthly payments cover only the interest on the loan. They do not pay off any of the capital. You will need to arrange to pay separately into a savings or investment scheme to build up a lump sum to pay off the mortgage at the end of the term. See Step 8 How to repay your mortgage - Interest-only. It is your responsibility to make sure you have enough money to repay the mortgage at the end of the term, otherwise you could lose your home. Page1 of 7 Date 1/10/2007
  2. 2. More Mortgage Info Source of information – FSA – Consumer information Mortgages - How to repay your mortgage Advantages and disadvantages of the repayment methods Repayment Interest-only mortgage Mortgage Will it pay off the Yes, as long as you No, not on its own. You need to have some mortgage? make all the other arrangement for repaying the loan. payments agreed You will need to make monthly payments with the lender, the to a savings or investment plan to build up whole loan will be a lump sum. repaid by the end of the mortgage But there is a risk that the plan will not term. grow enough to pay off the mortgage in full. What if interest It doesn't matter which method you have, if interest rates rise, rates go up? your payments will normally increase (unless you have a fixed interest rate Moving home and You will usually Because you won't have repaid any ‘capital’ re mortgaging have paid off some you will need to pay off the same amount of the ‘capital’ and that you borrowed. Whether you move so will need to pay home and stay back less than you But you can carry over any accompanying with the same borrowed. savings plan to your new mortgage and the lender or take a mortgage term for this part of the loan will mortgage with a When arranging be what's left of the term of the plan (that new lender, you your new is, you don't need to start again). will need to repay mortgage, even if the mortgage and you are borrowing If the new mortgage is bigger than the old start a new one. more, see if you one, you need to decide how you will pay can afford the new off the extra loan (this could be done on a monthly payments repayment or interest-only basis). over the term that you had left on the last mortgage – you don't have to take a repayment mortgage over 25 years. What if you run You could ask Your lender might agree to reduce or even into problems your lender to stop the mortgage payments for a while. keeping up your extend the term or monthly accept interest- But you will not necessarily be able to Page2 of 7 Date 1/10/2007
  3. 3. More Mortgage Info repayments? only payments for reduce the amount you pay each month into a while. This a savings scheme (particularly if it is an reduces the amount endowment policy). you pay each month in the short term but increases the total cost of the loan. Your lender might agree to stop your payments for a while. Is this a suitable Yes, if you want to Whether an interest-only mortgage suits mortgage for be absolutely sure you depends on whether you’re you? that your loan will comfortable with taking the risk of repaying be fully repaid at your mortgage with a savings plan which is the end of the linked to the stock market. term. Don’t forget your monthly If you are not comfortable with this risk, a payments could repayment mortgage is likely to be a better increase if interest choice. rates rise. Mortgages - How to repay your mortgage - interest only - some stock market schemes to pay off a mortgage Method Advantages Disadvantages Endowment Life insurance - is built Commission and charges – these mortgage - a type of into it. Some policies are taken out of the fund which investment which aims include cover for critical means less of your money is to build up the lump illness, accidents or invested to grow. sum you need by unemployment. investing in shares or Inflexible – there may be financial unit-linked schemes. Risk – varies with the type penalties if you stop paying into You must save into the of investment you choose. the plan before the end of its full investment plan every With-profits funds are term or cash it in after only a few month until the aimed at people seeking years. mortgage term ends. medium-risk investments; unit-linked funds often Keeping track – Your policy enable you to switch provider will send you reviews between funds, so you can every 2 years. You may need to choose the risk profile that increase your payments if the suits you. investment is not performing well. Individual savings Tax – currently the return Limit – you cannot pay more than account (ISA) on investments held in an £7,000 into an ISA in each tax ISA is free of personal Page3 of 7 Date 1/10/2007
  4. 4. More Mortgage Info mortgage – You put your savings taxes. Choice – You can use year. Commission and charges - set-up into shares or unit cash, stocks and shares to costs and a percentage of the fund trusts. The ISA wrapper build up your ISA savings. must be paid each year. means that growth from investing your savings Flexibility – You can vary Life insurance - not included. is tax-free. the amount you save, stop paying in or withdraw your Risk –could be a problem if you money at any time. You need access to your investment can also switch when share prices are low. investments easily. Keeping track – could be a problem as there's no automatic review process. You may not realise when you need to increase your payments. You may need to increase your payments if the investment is not performing well. Pension mortgage Tax – you get income tax Charges and premiums – can be relief at your highest rate high if you need to ensure your your savings are paid on contributions you make investment will pay off the into a personal pension into the pension plan. The mortgage. plan from which you lump sum you get when eventually take a tax- you retire is tax free. Inflexible – you can't take any of free lump sum and use the money till at least age 50 and it to repay the loan. Life insurance – is built this could rise to 55 by 2010. into the pension? Life insurance - not included. But if you die before pension age, the money in your fund could be used to pay off the mortgage - but it may not be enough. Risk –There will be less money for your retirement because you're using the lump sum to pay off the mortgage. Keeping track - could be a problem as there's no automatic review process. You may need to increase your payments if the investment is not performing well. Page4 of 7 Date 1/10/2007
  5. 5. More Mortgage Info Mortgage repayment v- Interest only In sourcing your mortgage, I can confirm that Mortgage-Desk have outlined the different methods for the repayment of your mortgage and I have received a copy of the “Mortgages - How to repay your mortgage” booklet. I can confirm that I have made the following provisions for the repayment of the mortgage at the end of the term of the mortgage: Please Means of Details tick Repayment Capital & Interest No repayment vehicle required mortgage Endowment Plan Pension ISA Inheritance Sales of mortgage Property Sale of other Property owned Other Investment Plan * Sale of other Assets/ Business * * This can include: Cash Savings, Stocks & Shares, Unit Trust, Investment Bond, Sales of Business, Sales of Commercial property (BTL) and Sale of non property assets. Name: ______________________ Name: ______________________ Signature _____________________ Signature _____________________ Date _ _ / _ _ / _ _ Date _ _ / _ _ / _ _ Page5 of 7 Date 1/10/2007
  6. 6. More Mortgage Info Continuation sheet : Page6 of 7 Date 1/10/2007
  7. 7. More Mortgage Info Page7 of 7 Date 1/10/2007

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