Understanding your mortgage can help you to sort out any issues that come up, think about how best to make repayments. It can also help you speak with your mortgage lender.
If you’re getting a mortgage for the first time, you may be learning about what it involves.
A mortgage is a loan that is normally used to buy a home. The lender is usually a bank or building society. Most people pay the loan back over a long period of time, such as 25 or 30 years. This time period is known as the term.
The loan is secured against the home. This means that the lender can take back the house and sell it (repossess it) if you don’t continue with the monthly payments. But the lender must have done everything they can to help you continue with your mortgage payments. Repossession should only be a last option.
There are different types of mortgage. But there are two main categories:
It’s important to know which type of mortgage you have and how well your repayment is going. If you are worried or want to ask questions, you should contact your lender.
This is the most common type of mortgage. You pay back both the actual mortgage loan (known as the capital) and the interest on that loan, over a set period of time. At the end of the term, you will have paid the mortgage off in full.
With interest-only mortgages, you only pay the interest for the duration of the loan. At the end of the term, you need to pay off the full amount owed as a single payment.
You therefore need to have a way of paying this money when the term ends.
Make sure you have all the information you need about the type of mortgage you have or would like to have. You can call our financial guides on 0808 808 00 00 if you would like more information about the different types of mortgage.