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Your mortgage can be arranged over a period of 5 to 35 years, depending on your personal circumstances and the type of mortgage you choose.
The two standard - and most common - ways to repay your mortgage
Capital & interest
The monthly mortgage payment is made up partly of a sum to repay a proportion of the amount borrowed (capital) and partly of a sum to repay the interest.
As the mortgage term progresses and the amount of capital owed begins to decrease, the proportion of the monthly mortgage payment representing interest decreases. This means that as the term progresses on a capital and interest repayment mortgage, the sum paid each month towards the capital becomes greater and the amount towards interest reduces. Providing all repayments are made, it is guaranteed that the loan will be repaid at the end of the term.
The monthly mortgage payment consists of just the interest due on the original loan amount. You pay none of the outstanding capital and at the end of the mortgage you will still owe the amount you originally borrowed. The capital element of the loan will normally be repaid at the end of the term using some form of repayment strategy. It is your responsibility to ensure a repayment strategy is in place to repay the mortgage at the end of the mortgage term. You also need to ensure any repayment strategy is reviewed regularly to ensure it is on target to repay your mortgage at the end of the term.
Remember: interest-only mortgages are only applicable when there is an acceptable source of capital repayment.
YOUR MORTGAGE IS SECURED ON YOUR HOME. THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
*Reviewed May 2023.