Home | Contact Us | Help | About moneybasics
 |
Lenders have developed many different types of mortgages, which offer borrowers different ways to repay.
|
Repayment mortgage
- Monthly repayments include a sum for the interest on the amount borrowed, and a sum to pay off some of the capital of the mortgage.
- Normally, the bank or building society would also require a life assurance protection policy to be taken out.
Interest-only mortgages
There are various forms of ‘interest only' payment plans. The monthly repayment consists only of interest on the amount borrowed. The capital is not repaid monthly as part of the mortgage payment, but by means of a separate savings plan of some sort. The most usual are:
There are various forms of ‘interest only' payment plans. The monthly repayment consists only of interest on the amount borrowed. The capital is not repaid monthly as part of the mortgage payment, but by means of a separate savings plan of some sort. The most usual are:
- endowment mortgages
- pension mortgages
- ISA mortgages
Endowment mortgages
- This is a mortgage where you take out an endowment life assurance policy for the term of the loan and for the amount you borrowed.
- You make the premiums to the life assurance company.
- When the term of the mortgage is over, the life assurance policy matures, and the money is used to replay the capital of the mortgage.
- This also provides the life assurance protection to repay the mortgage.
This form of mortgage has recently come under criticism because many plans were sold with generous forecasts. Unfortunately, policies haven't generated enough money to repay the mortgage.
Accelerator mortgages
- They are a cross between a mortgage and a bank account.
- The mortgage is considered as an overdraft on a bank account. Interest earned on money paid into the account goes towards paying off the mortgage loan.
Further Information
The Office of Fair Trading is a government body dedicated to protecting consumers' rights. Consumer Direct is their telephone and online service for offering advice on consumer issues, and it can offer help on everything to do with buying and selling your home.
For more information about mortgages and regulations, visit the Mortgages Made Clear section on the Money Made Clear website, created by the FSA (Financial Services Authority).
The Office of Fair Trading is a government body dedicated to protecting consumers' rights. Consumer Direct is their telephone and online service for offering advice on consumer issues, and it can offer help on everything to do with buying and selling your home.
For more information about mortgages and regulations, visit the Mortgages Made Clear section on the Money Made Clear website, created by the FSA (Financial Services Authority).
Related Links
In debt and need help?
Call a CCCS counsellor on 0800 138 1111.
