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Capital and Interest Mortgage
The regulator has expressed its primary concerns as being the marketing and advising of these mortgages and the associated repayment investment vehicles.
The downturn in the Investment and property markets, have meant that a number of clients have found that the Investments that they had planned to use to repay their mortgage, at the end of the term have not, or will not, repay the capital sum that they had planned.
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More About Capital and Interest Mortgages
The truth is that when the clients should have put more money into the investment plan to make up any projected shortfall they ignored the advice and now we have a number of clients who will have to make other arrangements to repay any shortfall.
Capital and Interest mortgages are what it says on the tin. You repay each month some capital and some of the interest, with each repayment that you make. In the early years of a 25 year mortgage most of the monthly repayment would be interest. It would not be until around year ten that you would start to see the capital reducing by sizeable amounts.
If we go back 10/15 years most mortgages would have had interest calculated on an annual basis in arrears. This has gradually changed towards interest calculated monthly, or daily in some cases, whereby you will see the capital element reducing a great deal quicker.
A capital and interest, or repayment mortgage as it is more commonly known, is the safe option, but does take away some of your personal choice on how you may wish to repay your mortgage
If you would like to know more why not call Michael J Alexander today, we are here to help you, and with over 40 years of experience in financial services, with access to the whole of the market as Independent Mortgage Advisers, we are ideally placed to be find the right product to suit your personal requirements.
The amount of capital you repay in each year will depend upon how the interest is calculated, which could be anything ranging between daily and annually. If you are having your interest calculated on a daily basis you would be repaying far less interest over the mortgage term and you should try and look for this type of repayments. You can also vary the amount of capital you repay with the agreement of the lender by structuring only a part of your total mortgage to be on capital and interest and the balance on interest only. This will of course lower your monthly repayment to make it more affordable and you can change the spilt over the mortgage term as your income increases.
The overall cost for comparison is 5% APR. The actual rate available will depend on your circumstances. Ask for a personalised illustration.