Mortgages - in plain English!

A mortgage is a sum of money borrowed from a bank or building society in order to purchase a property. The money is then paid back to the Lender over a fixed period of time together with accrued interest. There are many different types of mortgages and there will be one out there that best suits you.

Types of Mortgage

There are essentially two different types of mortgage:
Repayment only,
(capital and interest mortgage)
Interest only,
(ISA, pension or endowment mortgage)

Repayment only

Your monthly repayments consist of repaying the capital amount borrowed together with accrued interest.

On your mortgage statement, normally received annually, you will see that the amount borrowed decreases throughout the term.

Interest only

With this type of mortgage, only the interest is paid off with each mortgage payment. The borrower also takes out at the same time, an alternative repayment vehicle' (method of paying off the mortgage) such as an ISA, pension plan or endowment policy.