how to repay your mortgage

Once you’ve decided which mortgage product’s right for you,
you’ll need to choose the best way to repay the mortgage.

The following is a brief guide to the various methods of repaying your mortgage.

It’s important that you understand and feel comfortable with how you choose to pay back your mortgage, either on a repayment or interest only basis.

You will also have the option of combining these methods on a part repayment and part interest only basis.

repayment

A repayment mortgage pays off the amount of money you’ve borrowed plus the interest we charge.

With this type of mortgage, you gradually pay off the amount borrowed over an agreed number of years.

Your monthly payment covers the interest we charge for the loan. It also repays part of the money borrowed. In the early years, the largest part of the monthly payment is interest. However, as the mortgage balance reduces, so does the interest portion. This means that towards the end of the mortgage, most of it is going towards paying off the amount of money you’ve borrowed. The mortgage will be repaid at the end of the mortgage term providing you maintain the payments.

As life assurance cover isn’t built in, we recommend that you consider taking out some form of life cover to repay the mortgage if you die before the end of the mortgage term.

interest only mortgage

There are a number of different variations of this type of loan but they all have one feature in common. Namely that the monthly payment to us consists only of the interest charged for the mortgage.

In order to repay the capital borrowed on an interest only mortgage, you’ll have to arrange an investment product. You’ll need to make regular payments into this product which will be designed to repay your mortgage at the end of the term.

Examples of investment products are:

  • Endowment policy
  • Pension Policy
  • Individual Savings Account
  • Unit Trusts

As life assurance may not be built into repayment and interest only mortgages, we recommend that you consider the need for this type of insurance protection.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

© Northern Rock plc. 2008