Mortgage Repayment

Introduction

Once your mortgage application is approved in principle, you may have the option to decide how to repay your loan. You can choose a payment plan that suits your financial situation and future goals. The following provides some example payment plans:

Capital and interest mortgages

With this option, your monthly payment covers two things:

• Interest: A portion of your payment goes toward the interest on your loan.
• Capital: The rest reduces the original loan amount.

In the early years, most of your repayment covers the interest. As time goes on, the balance shifts, with more of your payment reducing the loan amount. By the end of the term, both the interest and the capital are fully repaid.

Interest-only mortgages

This option means lower monthly payments, as you’re only paying the interest on your loan. However, the capital—the original amount borrowed—remains unpaid. To opt for an interest-only mortgage, lenders need to see evidence of a clear and credible repayment strategy. This plan must explain how you’ll repay the capital at the end of the mortgage term.

Acceptable repayment strategies include:

• Savings or investment products.
• Pension lump sums.
• Periodic capital repayments from irregular income sources, like bonuses.
• Proceeds from selling another property or land.
• Any other method that meets lending criteria.

Important considerations

If your repayment plan involves an investment, remember it’s separate from the mortgage itself. Be sure to factor the cost of maintaining your investment into the overall affordability of your mortgage.

Need help to make the right decision?

At Maplestone, we’re here to guide you through the process and ensure your payment choice aligns with your financial future.

Whether you’re leaning toward capital and interest, interest-only, or a combination of both, let us help find the right repayment plan for you!