We've
put together a list of the most commonly-asked questions about
repayment mortgages to help you understand their pros and cons.
Question:
How many years can I take out a repayment mortgage for?
Answer:
While the standard term used to be 25 years, it is now possible
to take out repayment mortgages for anything up to 52 years.
Question:
Do you need a high income for a repayment mortgage?
Answer:
No. As long as you can afford the repayments and meet your lender's
standard borrowing rules, then it does not matter what your
income is.
Question:
Do you need a large deposit for a repayment mortgage?
Answer:
No. In fact, repayment mortgages are often the only kind of
mortgage available to people with no deposits – quite
a few lenders offer 100% repayment mortgages, which require
no deposit.
Question:
What if I have a bad credit rating?
Answer:
Repayment mortgages are ideal for people with bad
credit ratings. Because there is less risk than with an
interest-only
mortgages, many of the mortgages available to people with
bad credit ratings are repayment-only mortgages.
Question:
When I get to the end of a repayment mortgage, will I still
owe anything?
Answer:
No. You will own the property outright as soon as you make your
last payment. The only extra costs you may have will be your
mortgage lender's standard terminal fees – fees paid to
cover the administration costs of transferring the deeds of
your home from your mortgage lender to you.
Question:
I've been told that increases to the interest rate don't have
as much effect on repayment mortgages as on interest-only mortgages?
Answer:
That's right. If interest rates go up, your monthly payment
will not go up by as much on a repayment mortgage as it would
do on an interest-only mortgage. This is because only part of
your monthly payment is interest – the rest is a payment
towards the capital
sum you borrowed, which is not affected by the interest
rate.
With
interest-only mortgages, your whole monthly payment is made
up of interest, so an increase in the interest rate will have
a greater effect on it.
Question:
I understand why repayment mortgages are a good idea, but I
am worried I will not be able to afford the monthly payments.
If I start out with an interest-only mortgage, can I later switch
to a repayment mortgage when I am earning more?
Answer:
Yes. There are no real restrictions on switching between different
types of mortgage. The only thing to remember is that if
you want to switch from an interest-only
mortgage to a repayment mortgage, you will either have to
increase the term (length) of the mortgage or face an increase
in your monthly payments. It is much better
to start with a repayment mortgage if you can afford to.
Read
enough? Just want a quote? To get
your best mortgage quote quickly and easily we can
put you in contact with a recommended mortgage adviser. It's free,
completely confidential and there's no obligation at all. Simply
fill out the form below
