Essentially there are three ways in which a lender advances money.

The first is Capital & Interest Repayment. Second is Interest Only and lastly there is Investment Linked.

Capital & Interest Repayment

Also known simply as "Repayment", this type of mortgage is by far the most popular method with borrowers today. The payments you make to the lender comprise of part interest and part capital so that you are paying off the debt over your chosen loan period.

In the early years most of your payments are made up of interest so that the mortgage debt will not reduce significantly in the initial stages. Towards the end of the term however, most of your monthly payments are capital so you will see the size of your loan reduce quite dramatically.

Repayment graph



Interest Only

With this option you are simply paying the interest that accrues on the debt and nothing more. The loan itself is not being repaid and at the end of the mortgage term, you still owe the original amount borrowed.

Repayment graph



Investment Linked Mortgage

Under this method you still have an interest only mortgage with the lender but additionally you save money in an investment fund (usually run by a Life Assurance company or Investment house) which will hopefully accrue sufficient funds over the life of the mortgage to repay the debt at the end. Typical examples of the type of investments used are Endowments, Pensions and ISAs.

Repayment graph

Whilst very popular in the 80's and early to mid 90's, Investment mortgages are less popular nowadays due to the concerns that many have about the long term predictability of the Stocks and Shares that many of these products invest heavily in.

There are many factors involved with deciding your repayment method. Some can be summarised as:

Premier Financial Services will cover each step thoroughly with you so that you fully understand the options and are able to select the package most suitable to your needs. Contact our knowledgeable staff today for more information.

“Paul assisted us with sorting out our mortgage when buying our current house and also arranging life & other insurance. He was dedicated in following our applications through to a successful end result in both cases.

- Geraldene Dobson - Owner, Hemisphere Accounting Ltd -

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