Repayment Mortgage

This is the most popular type of mortgage and the simplest to understand. You borrow money to buy your home, then you pay it back to the lender, together with interest. So, each month you’re paying back a bit of the money you borrowed and a bit of interest.

At first, you’ll be paying mostly interest each month, so the balance of the money you owe won’t go down by very much. But as time goes by, you’ll start to see the balance going down too. When you get to the end of the mortgage, assuming you don’t miss any monthly payments, you’ll have paid back everything you owe your lender and you’ll own your home outright.

Interest only

With an interest only mortgage, you only pay the interest on the mortgage each month. You don’t pay back any of the actual money you’ve borrowed to buy your house. Your payments will be lower than some other types of mortgage, but at the end of the mortgage, you’ll still owe the original amount that you borrowed. This is the most popular type of mortgage and the simplest to understand.

You borrow money to buy your home, then you pay it back to the lender, together with interest. So, each month you’re paying back a bit of the money you borrowed and a bit of interest.

So, to get an interest only mortgage, you’ll have to show the lender how you plan to pay them back at the end of the mortgage. You won’t be able to rely on the possibility of a windfall, such as an inheritance or a bonus.  You’ll need a realistic plan to raise the money to pay them back. Your lender will check from time to time that your plans are on track to repay the total amount that you borrowed.

This type of mortgage used to be quite common but not any more, and not all lenders offer interest only deals now.

A mortgage is a loan secured against your home. Your home may be
repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.