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Company Director:
Christine Chave. |
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Repayment
Options |
How
am I going to repay the mortgage? |
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| With mortgages you
can choose the method by which you are going to
repay the money to the mortgage lender. You he
two choices: interest-only or repayment (or a mix
of both). Repayment
mortgages
Interest-only mortgages
Daily or annual interest calculation? |
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Repayment
mortgages
This is fairly straightforward: you pay back the
mortgage each month - paying the interest on the
mortgage and part of the mortgage itself. At the
outset, you pay mostly interest but eventually you
pay off more of the loan. ^
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Interest-only
mortgages
This means paying only the interest owed on the
mortgage. Alongside the interest repayments, you
also set up an investment with the intention of
building enough money to repay the outstanding balance
on the mortgage. For first time buyers, the prospect
of interest-only mortgages can be appealing due
to the lower mortgage payments at the outset -
particularly if they foresee an income rise in
the future which will allow them to switch to
full repayment after a couple of years. However,
if you are a first time buyer or anyone considering
an interest-only mortgage as a means of affording
to repay a mortgage, it''s important to note that
your intention should always be to clear your
mortgage as soon as possible. Either opt for the
repayment method, or have a realistic plan for
repayment alongside your interest-only mortgage.
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Daily
or annual interest calculation?
This is the method that the mortgage lender uses
to calculate how much interest you owe. Annual calculation
costs more for repayment mortgages, since you don''t
benefit from the amount of the loan that you have
already repaid that year. However, interest calculation
is only one part of the broader picture, so itis
best to consult an independent mortgage broker.
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