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More Mortgage Info
Mortgages - How to repay your mortgage
There are two ways to repay the amount you have borrowed (the ‘capital’). Their
advantages and disadvantages are described below.

Repayment mortgage (also called a capital-and interest loan)
Your monthly payments gradually pay off the amount you owe as well as paying the
interest charged on the loan. Provided you make all the agreed payments, the loan will be
fully paid off by the end of the mortgage term.




Interest-only mortgage
Your monthly payments cover only the interest on the loan. They do not pay off any of
the capital. You will need to arrange to pay separately into a savings or investment
scheme to build up a lump sum to pay off the mortgage at the end of the term. See Step 8
How to repay your mortgage - Interest-only. It is your responsibility to make sure you
have enough money to repay the mortgage at the end of the term, otherwise you could
lose your home.




Page1 of 7                                                                 Date 1/10/2007
More Mortgage Info
Source of information – FSA – Consumer information




Mortgages - How to repay your mortgage
Advantages and disadvantages of the repayment methods
                            Repayment                Interest-only mortgage
                            Mortgage
Will it pay off the Yes, as long as you              No, not on its own. You need to have some
mortgage?           make all the                     other arrangement for repaying the loan.
                    payments agreed                  You will need to make monthly payments
                    with the lender, the             to a savings or investment plan to build up
                    whole loan will be               a lump sum.
                    repaid by the end
                    of the mortgage                  But there is a risk that the plan will not
                    term.                            grow enough to pay off the mortgage in
                                                     full.


What if interest            It doesn't matter which method you have, if interest rates rise,
rates go up?                your payments will normally increase (unless you have a fixed
                            interest rate


Moving home and You will usually                     Because you won't have repaid any ‘capital’
re mortgaging      have paid off some                you will need to pay off the same amount
                   of the ‘capital’ and              that you borrowed.
Whether you move so will need to pay
home and stay      back less than you                But you can carry over any accompanying
with the same      borrowed.                         savings plan to your new mortgage and the
lender or take a                                     mortgage term for this part of the loan will
mortgage with a    When arranging                    be what's left of the term of the plan (that
new lender, you    your new                          is, you don't need to start again).
will need to repay mortgage, even if
the mortgage and you are borrowing                   If the new mortgage is bigger than the old
start a new one.   more, see if you                  one, you need to decide how you will pay
                   can afford the new                off the extra loan (this could be done on a
                   monthly payments                  repayment or interest-only basis).
                   over the term that
                   you had left on the
                   last mortgage –
                   you don't have to
                   take a repayment
                   mortgage over 25
                   years.
What if you run             You could ask      Your lender might agree to reduce or even
into problems               your lender to     stop the mortgage payments for a while.
keeping up your             extend the term or
monthly                     accept interest-   But you will not necessarily be able to

Page2 of 7                                                                               Date 1/10/2007
More Mortgage Info
repayments?          only payments for reduce the amount you pay each month into
                     a while. This         a savings scheme (particularly if it is an
                     reduces the amount endowment policy).
                     you pay each
                     month in the short
                     term but increases
                     the total cost of the
                     loan. Your lender
                     might agree to stop
                     your payments for
                     a while.
Is this a suitable   Yes, if you want to    Whether an interest-only mortgage suits
mortgage for         be absolutely sure     you depends on whether you’re
you?                 that your loan will    comfortable with taking the risk of repaying
                     be fully repaid at     your mortgage with a savings plan which is
                     the end of the         linked to the stock market.
                     term. Don’t forget
                     your monthly           If you are not comfortable with this risk, a
                     payments could         repayment mortgage is likely to be a better
                     increase if interest   choice.
                     rates rise.



Mortgages - How to repay your mortgage
- interest only - some stock market
schemes to pay off a mortgage
Method                    Advantages                     Disadvantages
Endowment                 Life insurance - is built      Commission and charges – these
mortgage - a type of      into it. Some policies         are taken out of the fund which
investment which aims     include cover for critical     means less of your money is
to build up the lump      illness, accidents or          invested to grow.
sum you need by           unemployment.
investing in shares or                                   Inflexible – there may be financial
unit-linked schemes.      Risk – varies with the type    penalties if you stop paying into
You must save into the    of investment you choose.      the plan before the end of its full
investment plan every     With-profits funds are         term or cash it in after only a few
month until the           aimed at people seeking        years.
mortgage term ends.       medium-risk investments;
                          unit-linked funds often        Keeping track – Your policy
                          enable you to switch           provider will send you reviews
                          between funds, so you can      every 2 years. You may need to
                          choose the risk profile that   increase your payments if the
                          suits you.                     investment is not performing well.
Individual savings        Tax – currently the return     Limit – you cannot pay more than
account (ISA)             on investments held in an      £7,000 into an ISA in each tax
                          ISA is free of personal

Page3 of 7                                                                     Date 1/10/2007
More Mortgage Info
mortgage –

You put your savings
                          taxes.

                          Choice – You can use
                                                        year.

                                                     Commission and charges - set-up
into shares or unit       cash, stocks and shares to costs and a percentage of the fund
trusts. The ISA wrapper   build up your ISA savings. must be paid each year.
means that growth from
investing your savings    Flexibility – You can vary    Life insurance - not included.
is tax-free.              the amount you save, stop
                          paying in or withdraw your    Risk –could be a problem if you
                          money at any time. You        need access to your investment
                          can also switch               when share prices are low.
                          investments easily.
                                                        Keeping track – could be a
                                                        problem as there's no automatic
                                                        review process. You may not
                                                        realise when you need to increase
                                                        your payments. You may need to
                                                        increase your payments if the
                                                        investment is not performing well.
Pension mortgage          Tax – you get income tax      Charges and premiums – can be
                          relief at your highest rate   high if you need to ensure your
your savings are paid     on contributions you make     investment will pay off the
into a personal pension   into the pension plan. The    mortgage.
plan from which you       lump sum you get when
eventually take a tax-    you retire is tax free.       Inflexible – you can't take any of
free lump sum and use                                   the money till at least age 50 and
it to repay the loan.     Life insurance – is built     this could rise to 55 by 2010.
                          into the pension?
                                                        Life insurance - not included. But
                                                        if you die before pension age, the
                                                        money in your fund could be used
                                                        to pay off the mortgage - but it
                                                        may not be enough.

                                                        Risk –There will be less money
                                                        for your retirement because you're
                                                        using the lump sum to pay off the
                                                        mortgage.

                                                        Keeping track - could be a
                                                        problem as there's no automatic
                                                        review process. You may need to
                                                        increase your payments if the
                                                        investment is not performing well.




Page4 of 7                                                                   Date 1/10/2007
More Mortgage Info
Mortgage repayment v- Interest only
In sourcing your mortgage, I can confirm that Mortgage-Desk have outlined the different
methods for the repayment of your mortgage and I have received a copy of the
“Mortgages - How to repay your mortgage” booklet.

I can confirm that I have made the following provisions for the repayment of the
mortgage at the end of the term of the mortgage:

Please Means of                   Details
tick   Repayment
       Capital & Interest         No repayment vehicle required
       mortgage

             Endowment Plan


             Pension


             ISA


             Inheritance


             Sales of mortgage
             Property

             Sale of other
             Property owned

             Other Investment
             Plan *

             Sale of other
             Assets/ Business *


* This can include:
Cash Savings, Stocks & Shares, Unit Trust, Investment Bond, Sales of Business, Sales of
Commercial property (BTL) and Sale of non property assets.


Name: ______________________            Name: ______________________


Signature _____________________ Signature _____________________


Date _ _ / _ _ / _ _                        Date _ _ / _ _ / _ _
Page5 of 7                                                                 Date 1/10/2007
More Mortgage Info
Continuation sheet :




Page6 of 7             Date 1/10/2007
More Mortgage Info




Page7 of 7     Date 1/10/2007

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Mortgages How To Repay Your Mortgage

  • 1. More Mortgage Info Mortgages - How to repay your mortgage There are two ways to repay the amount you have borrowed (the ‘capital’). Their advantages and disadvantages are described below. Repayment mortgage (also called a capital-and interest loan) Your monthly payments gradually pay off the amount you owe as well as paying the interest charged on the loan. Provided you make all the agreed payments, the loan will be fully paid off by the end of the mortgage term. Interest-only mortgage Your monthly payments cover only the interest on the loan. They do not pay off any of the capital. You will need to arrange to pay separately into a savings or investment scheme to build up a lump sum to pay off the mortgage at the end of the term. See Step 8 How to repay your mortgage - Interest-only. It is your responsibility to make sure you have enough money to repay the mortgage at the end of the term, otherwise you could lose your home. Page1 of 7 Date 1/10/2007
  • 2. More Mortgage Info Source of information – FSA – Consumer information Mortgages - How to repay your mortgage Advantages and disadvantages of the repayment methods Repayment Interest-only mortgage Mortgage Will it pay off the Yes, as long as you No, not on its own. You need to have some mortgage? make all the other arrangement for repaying the loan. payments agreed You will need to make monthly payments with the lender, the to a savings or investment plan to build up whole loan will be a lump sum. repaid by the end of the mortgage But there is a risk that the plan will not term. grow enough to pay off the mortgage in full. What if interest It doesn't matter which method you have, if interest rates rise, rates go up? your payments will normally increase (unless you have a fixed interest rate Moving home and You will usually Because you won't have repaid any ‘capital’ re mortgaging have paid off some you will need to pay off the same amount of the ‘capital’ and that you borrowed. Whether you move so will need to pay home and stay back less than you But you can carry over any accompanying with the same borrowed. savings plan to your new mortgage and the lender or take a mortgage term for this part of the loan will mortgage with a When arranging be what's left of the term of the plan (that new lender, you your new is, you don't need to start again). will need to repay mortgage, even if the mortgage and you are borrowing If the new mortgage is bigger than the old start a new one. more, see if you one, you need to decide how you will pay can afford the new off the extra loan (this could be done on a monthly payments repayment or interest-only basis). over the term that you had left on the last mortgage – you don't have to take a repayment mortgage over 25 years. What if you run You could ask Your lender might agree to reduce or even into problems your lender to stop the mortgage payments for a while. keeping up your extend the term or monthly accept interest- But you will not necessarily be able to Page2 of 7 Date 1/10/2007
  • 3. More Mortgage Info repayments? only payments for reduce the amount you pay each month into a while. This a savings scheme (particularly if it is an reduces the amount endowment policy). you pay each month in the short term but increases the total cost of the loan. Your lender might agree to stop your payments for a while. Is this a suitable Yes, if you want to Whether an interest-only mortgage suits mortgage for be absolutely sure you depends on whether you’re you? that your loan will comfortable with taking the risk of repaying be fully repaid at your mortgage with a savings plan which is the end of the linked to the stock market. term. Don’t forget your monthly If you are not comfortable with this risk, a payments could repayment mortgage is likely to be a better increase if interest choice. rates rise. Mortgages - How to repay your mortgage - interest only - some stock market schemes to pay off a mortgage Method Advantages Disadvantages Endowment Life insurance - is built Commission and charges – these mortgage - a type of into it. Some policies are taken out of the fund which investment which aims include cover for critical means less of your money is to build up the lump illness, accidents or invested to grow. sum you need by unemployment. investing in shares or Inflexible – there may be financial unit-linked schemes. Risk – varies with the type penalties if you stop paying into You must save into the of investment you choose. the plan before the end of its full investment plan every With-profits funds are term or cash it in after only a few month until the aimed at people seeking years. mortgage term ends. medium-risk investments; unit-linked funds often Keeping track – Your policy enable you to switch provider will send you reviews between funds, so you can every 2 years. You may need to choose the risk profile that increase your payments if the suits you. investment is not performing well. Individual savings Tax – currently the return Limit – you cannot pay more than account (ISA) on investments held in an £7,000 into an ISA in each tax ISA is free of personal Page3 of 7 Date 1/10/2007
  • 4. More Mortgage Info mortgage – You put your savings taxes. Choice – You can use year. Commission and charges - set-up into shares or unit cash, stocks and shares to costs and a percentage of the fund trusts. The ISA wrapper build up your ISA savings. must be paid each year. means that growth from investing your savings Flexibility – You can vary Life insurance - not included. is tax-free. the amount you save, stop paying in or withdraw your Risk –could be a problem if you money at any time. You need access to your investment can also switch when share prices are low. investments easily. Keeping track – could be a problem as there's no automatic review process. You may not realise when you need to increase your payments. You may need to increase your payments if the investment is not performing well. Pension mortgage Tax – you get income tax Charges and premiums – can be relief at your highest rate high if you need to ensure your your savings are paid on contributions you make investment will pay off the into a personal pension into the pension plan. The mortgage. plan from which you lump sum you get when eventually take a tax- you retire is tax free. Inflexible – you can't take any of free lump sum and use the money till at least age 50 and it to repay the loan. Life insurance – is built this could rise to 55 by 2010. into the pension? Life insurance - not included. But if you die before pension age, the money in your fund could be used to pay off the mortgage - but it may not be enough. Risk –There will be less money for your retirement because you're using the lump sum to pay off the mortgage. Keeping track - could be a problem as there's no automatic review process. You may need to increase your payments if the investment is not performing well. Page4 of 7 Date 1/10/2007
  • 5. More Mortgage Info Mortgage repayment v- Interest only In sourcing your mortgage, I can confirm that Mortgage-Desk have outlined the different methods for the repayment of your mortgage and I have received a copy of the “Mortgages - How to repay your mortgage” booklet. I can confirm that I have made the following provisions for the repayment of the mortgage at the end of the term of the mortgage: Please Means of Details tick Repayment Capital & Interest No repayment vehicle required mortgage Endowment Plan Pension ISA Inheritance Sales of mortgage Property Sale of other Property owned Other Investment Plan * Sale of other Assets/ Business * * This can include: Cash Savings, Stocks & Shares, Unit Trust, Investment Bond, Sales of Business, Sales of Commercial property (BTL) and Sale of non property assets. Name: ______________________ Name: ______________________ Signature _____________________ Signature _____________________ Date _ _ / _ _ / _ _ Date _ _ / _ _ / _ _ Page5 of 7 Date 1/10/2007
  • 6. More Mortgage Info Continuation sheet : Page6 of 7 Date 1/10/2007
  • 7. More Mortgage Info Page7 of 7 Date 1/10/2007