However much you decide to borrow you will have to repay the loan at the end of your chosen term, together with a particular amount of interest. There are a number of ways to pay off your mortgage efficiently wherever you buy property in the UK. For example you can either carry out monthly repayments towards the capital or just pay off the interest each month. Propsavvy have decided to outline a few options on the choices that are available to you.
Each month you will be required to pay back some of the capital you borrowed, including interest. Regardless of whether that is a BMV or PPS property purchase. In the early years your payments will go towards the interest accrued, and in later years the repayments go towards the capital you borrowed. Before you know it, by the end of your term you will have decreased the initial loan amount or even cleared the loan.
Interest Only Mortgages
As the name suggests this is a mortgage payment each month of the interest only. This type of mortgage will never chip away at the initial amount borrowed from your lender. At the end of the term it is your job to find the capital to pay the remaining loan you borrowed. This is normally achieved by selling property for more than you bought it for. This can sometimes be seen as one of the best mortgage deals for those individuals who wish to keep their monthly repayments as low as possible.
Some borrowers also look to other options to help manage and protect their mortgage commitments. We have listed a few widely used options:
Endowments pool all of your money with that of other substantial investors and invest at least some of the fund into the stock market. Be warned though that an endowment backed mortgage can be a large risk as the investment may not perform as well as you expect, meaning you end up with a gap between the value of your endowment and the amount you have to repay. Unlike other mortgages endowments automatically come with life insurance, this will cover your debts if you pass away before the end of the mortgage, thus protecting your family.
These are individual saving accounts which offer you the opportunity to earn money on your investment without having to pay income tax. To earn enough to repay your mortgage you will need to invest in something called equity ISA, which gives you exposure to the stock market, although there are no guarantees your investment will grow enough to cover the capital you need to repay.
You can pay back using an interest only loan with a personal pension. At the end of your term you withdraw a tax free lump sum to pay off your mortgage debt. You must be over 50 at this time and you can only take up to a quarter of the fund.
Remember a mortgage is available to you so that you can purchase that dream house on the UK property market or several houses for sale in London. Just assure yourself that you can repay the capital back for a stress free buying experience.