Guide Options
The House Hop Guide to Mortgages
Save £850 on legal fees*
Click here for free conveyancing quotes
*£850 is the average saving on a typical sale and purchase through our panel of conveyancing solicitors compared to using a high street solicitor (Survey of 52 high street solicitors, September 2010).
Click here for free conveyancing quotes
*£850 is the average saving on a typical sale and purchase through our panel of conveyancing solicitors compared to using a high street solicitor (Survey of 52 high street solicitors, September 2010).
Repayment Methods
Repayment
With a repayment mortgage you pay back both the interest and the principal (the amount loaned) over the term of the mortgage.The monthly repayments will be higher than for an interest only mortgage, however, at the end of the term (usually 25 years) you will own the property outright.
Interest Only
With an interest only mortgage your monthly payments only cover the interest on the amount loaned.At the end of the term you will have to pay back the loan and you will not own your property until you do.
Some interest only mortgage holders will pay off the loan by simply selling the property. This is often the case with those wanting to make a capital gain or buy-to-let landlords.
Endowment
With an endowment mortgage you make two monthly payments: one to cover the interest on the loan, the other into an endowment (life assurance) policy.The idea is that at the end of the term the proceeds of the endowment policy will be enough to pay off the principal in one lump sum — hopefully with a surplus left over as well.
This is not guaranteed, however, and if the endowment policy is not worth enough to pay of the principal then you will have to make up the shortfall. In the event of death, however, the life assurance aspect of the policy will ensure that your mortgage is paid off.
Pension
A pension mortgage is similar to an endowment mortgage, with one payment being made to cover the interest, while the other is made into a pension scheme (rather than an endowment policy).Money from the pension scheme is then used to pay off the principal in a lump sum at the end of the term.
