Borrowers who have a repayment mortgage are reducing both the capital sum and paying their interest. Repayment vehicles are not needed; however, often mortgage lenders may recommend or insist on a life insurance policy being taken in the event that a borrower/s dies before the mortgage is repaid.
Repayment mortgages are very easy to understand and often offer comfort to borrowers as they know they are reducing their liability to their lender. It also means there is no risk in an investment vehicle which may not be able to mature with sufficient funds to repay the capital at the end of the mortgage term.
However, unlike a pension, ISA or endowment mortgage, repayment loans do not give you the opportunity to benefit from a rising stock market. Also, when remortgaging, people often choose another 25 year repayment mortgage, to keep the initial monthly costs down. This means that the overall total period of your mortgage debts combined increases over time.
|House prices increased by 8 per cent in the last year - Wed, 15 Jun 2016|
|Does the market favour buy to let landlords over first time buyers - Tue, 12 Apr 2016|
|Homeowners who fail to switch mortgage deals may be paying out thousands of pounds extra - Tue, 29 Mar 2016|