Mortgages

Once you’ve decided on the type of mortgage you want, you’ll need to decide how to repay it. The main decision involves deciding between repayment (capital and interest) or interest only.

Whichever mortgage you choose, you’ll need to repay the capital (the amount you’ve borrowed) and pay interest – usually on a monthly basis.

How and when you repay the capital depends on whether you choose to arrange your mortgage on a capital and interest or an interest only basis. These options are explained in more detail below.

Repayment (Capital and Interest) mortgages

This arrangement involves paying back the interest and part of the capital on a monthly basis until the entire amount borrowed is eventually paid back over the mortgage term.

You have the reassurance that your mortgage will be repaid in full at the end of the term, as long as you make all your monthly payments.

You should take careful note of the fact that no life cover is included with this type of mortgage. We would strongly advise you to protect your family home by making sure you’ve enough life cover to pay off your mortgage in the event of your death.

Interest Only mortgages

Choose this option and your mortgage payments to the Society will consist of interest only. The capital should be repaid at the end of the mortgage term from the proceeds of an investment set up by you – this could be an endowment, a pension, ISA or another existing investment. You may select any, or a combination, of these options.

It’s important to bear in mind that with an interest only mortgage it is your responsibility to make suitable arrangements for the repayment of the capital. From time to time you should check with your financial advisor that your arrangements are adequate – you should remember that your investments may not provide the final return you were anticipating. 

If, at the end of your mortgage term, the proceeds from your investments aren’t enough to repay the capital outstanding, you will have to find the deficit from elsewhere. You will also need to check whether adequate life cover is included with your chosen investment, to ensure that the capital would be repaid in the event of your death. Before making a decision on which type of investment may be suitable, you should check with your Financial Advisor.