Mortgage and Remortgage
A Repayment Mortgage lets the borrower pay the interest plus some of the capital off the loan per month. In the early years the purchaser will be mainly paying off the interest and only a small amount off the capital, but as the capital gradu ally decreases over the years, so does the interest and the payments will gradually chip away at the capital. This means that the borrower will usually pay off the loan within the agreed repayment term.
The repayment term in the UK is usually 25 years. This standard period of time means that the repayments are a lot more manageable than, say, a mortgage paid off over 15 years. However, you can choose the length of repayment term.
The other type of mortgage available is an Interest Only Mortgage. You simply pay off the interest each month but do not touch the capital, which means that by the end of your repayment period you still owe exactly the same amount you borrowed from the lender in the first place. However, as you are not paying off the capital each month, the surplus money that you have is invested in a separate repayment vehicle.
There are two kinds of repayment vehicle, an Individual Savings Account or ISA and an Endowment Policy. Both of these work in a similar way in that the money that you pay in each month is invested into, and trades on, the stock market. The ISA or endowment provider will advise you as to which sector of the market to invest in and can estimate the return you will get from your ISA or endowment policy...
They should be able to calculate whether your savings plan will earn you enough money to pay off the mortgage and how long it will take. In some cases this type of investment can result in your mortgage being paid off early.