What You Need to Know about Your Options for Mortgage Repayment

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Getting a mortgage is often an exciting procedure – it opens up a lot of possibilities, after all, and it’s easy to get swept away with your dreams and thinking about what could be. However, it should be understood from the start that a mortgage is a long-term business deal; the banks (or other mortgage lenders) are in it for the money in the long term, and you’re in it because of the possibility of owning property.

When thinking about the kind of mortgage you want, you have to think first of all about how you can repay the mortgage lender – and about what kind of mortgage would be most favourable to you. Have you ever wondered how the whole mechanism works? Here’s what you need to know about your options regarding mortgage repayments.

Capital and interests

The capital is the basic amount that you borrow – that’s the amount you actually need to buy the property. The interest is the extra payment that is charged to you as a cost of borrowing. It’s the investment of the mortgage lender and is charged because they take on the risk. These amounts are separated and lead to different kinds of mortgages.

The repayment mortgage

It’s the most popular and most widely used mortgage scheme. In essence, you make periodical payments (for example, monthly) over a period of time (the term), until you have paid back both the interest and the capital.

The interest only mortgage

This is a mortgage whereby you pay only the interest at a periodical time, and then pay the original amount (the capital) back at some later date in full.

Paying back the capital

Various lenders have different criteria, but the bank (or other mortgage lender) will be mostly interested in you repaying the capital first and foremost.

Combined repayment and interest only mortgages

Some lenders may offer you different deals; one of them is the option to go with a part repayment and part interest only basis. This is a combination of the previously stated choices, and they can be combined to various degrees. It’s always recommended to follow expert advice.

It’s important for any prospective homeowner to understand that there are many different kinds of mortgages out there, as a mortgage advisor Bristol such as one from Open Vision Finance will confirm. Because the mortgage business is such a competitive one, with many players all competing with each other to offer the best deal possible, chances are you’ll find the most favourable one for you easily – provided, of course, you have some experts who can help review your personal situation, explain to you how mortgage lenders think, and broker a deal that’s perfect for you. In case of doubt, consult a professional. Seek the right information – it’s too important.

 

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Real Estate

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