UK Mortgage Types ... A Simple Guide

Understanding the types of mortgages available.

The current economic climate makes it appear there are fewer UK mortgage types available. But research shows enough options to get a mortgage in Britain still exist and still can confuse first-time home buyers.

In spite of the variety of mortgages available, they really only fall into two categories, and each ends in a different result.

Interest Only Mortgages

Interest Only Mortgages do not require you to make any principal payment until the end of the loan term itself. The monthly payments you do make go straight to the interest due. When the mortgage term expires, you must then pay the entire principal balance (the original mortgage amount you borrowed).

Smart borrowers advance plan to make this huge payment possible. You can also do smart planning by making monthly deposits to a good savings account, or other long term savings plan. An ISA, also known as endowment assurance, was especially created to help Interest Only Mortgagees (the borrower) to save the money needed to repay the principal on their interest only mortgage when due.

UK Repayment Mortgages

Repayment Mortgages have monthly payments are split between principal and interest. There is usually more flexibility in repayment mortgages. You could opt to increase the principal payments you make, extend your mortgage term, among other possibilities. Making extra payments on the capital (amount your borrowed) itself can allow you to pay off your mortgage more quickly and then save more toward your retirement.

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