A mortgage is simply a loan secured upon an asset, in this case your home.

The loan is ‘secured’ by the value of your home meaning that if you fail to keep up monthly repayments to the mortgage lender or otherwise make material breaches to the agreement you have with your lender, you may find that your home is subject to a court order to be repossessed.

Mortgages are usually repaid over a period of time, perhaps 15 - 30 years and whilst many mortgages are ‘repayment mortgages’, some are ‘interest-only’.

Interest-Only mortgages require that the borrower simply pays an interest charge every year, split monthly into 12 annual repayments. The interest rate is set and changes according to the terms of the loan but this rate is usually fixed to a known variable such as the Bank of England Base Rate, the Lender’s Variable Rate or LIBOR.

The borrower only ever pays interest, with the loan capital remaining untouched. This has the effect of reducing initial monthly repayments but increases the total interest paid over the term of the loan. At the end of the loan the borrower must repay the loan. This means that an alternative plan should be in place which will allow the borrower to invest money into a scheme to create the capital needed to repay the loan amount.

Repayment Mortgages are like Interest-Only mortgages except that as well as the interest, a small amount of loan capital is also repaid every month. Over the first 10 years of a 25 year mortgage the actual capital repaid might be quite small, with most of a lender’s monthly repayment comprising interest. However, the last 10 years of repayments will be largely made up of repaid loan capital as the amount of the debt decreases and the interest charged on the outstanding loan reduces every year.

Many mortgage lenders will quote you a monthly repayment figure based on an amortisation table. These are also available free on many websites, although different lenders charge mortgage interest in different ways.

Most loans are compared by APR (Annual Percentage Rate). This includes interest charges and other charges and also accounts for when interest is accrued.

If you buy your home with the aid of a mortgage then that mortgage will be registered against the title of your home. You will not be able to sell it until the mortgagee has agreed to release this ‘charge’ on your home’s title. Of course, they are required to act in accordance with the loan agreement.

It’s important to realise that there is much more to a loan than just the monthly cost. At Mortgage Required we can advise on which type of mortgage and which lender is best suited to your specific needs. We can also help you compare and contrast different options before you commit to an application.

To speak to a mortgage adviser, contact us on 01628 507477 for a chat with no obligation.

Related articles:

Download our Free First Time Buyers Guide

Recent posts

Buying a property, especially in the current climate, is a big decision for first time buyers. We have listed a few tips that can help you buy your first propertyy

Does the time of year make a difference in house purchases? The answer is, yes and no.

The popularity of buying a house can vary depending on various factors such as regional trends, how the economy looks, and of course personal circumstances. 

If you are looking at putting your house on the market, you may want to consider giving your garden some TLC. Small changes can make your outside space a lot more attractive to potential buyers resulting in a faster sale.

Getting on the property ladder is a big milestone in life, and is not something to take lightly. There are several things to take into consideration such as saving up for a deposit, finding your dream home, and finding the best mortgage product to suit you. Here we look at UK first time buyer statistics.

If you are struggling to get over the hurdle of saving enough deposit due to being in a rental property, but wish to purchase your own home, you may be able to with a 100% mortgage. You will need to meet certain requirements and be financially stable.

If you are looking at remortgaging your property but you are unsure whether it’s the right decision, we have listed five reasons why it might be for you.

As the cost-of-living crisis continues, many people across the UK are struggling financially, many of whom are finding it hard to get debt-free.

According to research by StepChange, there are five common reasons people don’t seek help and advice with debt concerns.

Friyay Rate Reviews

6 Feb 2024

Every Friday our experts search the market for the latest rates from every lender saving our clients some serious £'s!