Contact Us
Equinox House
Clifton Park
Shipton Road
York, YO30 5PA
Tel: 0800 083 4020
Email us
Ask a question
Complete our enquiry form and we will be in touch to discuss how we can help you
Mortgage Rates
Mortgage best buys and search for a mortgage using Moneyfacts
The Repayment of Capital
Introduction > > Repayment of Capital
There are many ways to actually repay the capital you borrow.
You can pay some of it back each month, slowly reducing the amount you owe (a repayment mortgage), or set the money aside in an investment contract such as an , which can be used to repay the capital at the end of the term.
The amount you have to save, or the rate at which you repay the debt, depends on the term of the mortgage and, (if you are using an investment contract) the growth rates actually achieved.
The repayment route is the safest as you can be sure that the mortgage will be paid off at the end of the term if all mortgage payments are met, provided all payments have been made in full and on time.
Alternatively, with the interest-only route, an investment contract may be used to generate a fund with the aim of paying off the mortgage and generating a surplus. However, if growth is lower than expected there may be a shortfall. The investment route cannot normally offer a guarantee of debt clearance, as the value of the investment can go down as well as up and you may not get back the full amount invested.
We have created a range of useful calculators to help you explore the options open to you.
-
Calculates the monthly cost for a Repayment Mortgage, given the amount borrowed, the term and the interest rate. -
For a given borrowing, term, interest rate and growth rate assumption, highlights the relative costs of the two types of mortgage. -
Allows you to compare two different monthly payment choices, and highlights the value of paying more than the minimum required as this both shortens the term of the mortgage and reduces the overall cost.
When using these it is best to be conservative in your assumptions about growth. For your information the Financial Services Authority's maximum allowed growth rate for official projections of tax efficient investments like ISAs is 9%pa.
Part of a mortgage adviser's role is to help you choose the most appropriate method of capital repayment.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Last updated on April 06, 2012
For details of our fees for mortgage business please see our page "How we are Paid".