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What is a Capital & Interest Mortgage?
This is the simplest method of arranging a mortgage and guarantees to repay the amount borrowed, assuming monthly payments are maintained over the agreed term of the mortgage.It is required that the loan be covered by a life assurance policy to ensure that repayment is still made in the event of untimely death. The cheapest and simplest life assurance policy is a Mortgage Protection Plan. This provides a reducing level of cover, roughly in line with the outstanding loan, over a fixed term. With this type of policy there is never a surrender value as premiums paid are purely buying the required level of life cover. |
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What are the advantages?
- Depending on age and prevailing interest rates this type of arrangement can prove to be cheaper than other mortgage repayment methods.
- The loan amount reduces visibly over the mortgage term, which some people prefer, and provides certainty of repayment at the end of the term.
- Monthly repayments can be altered, by extending or reducing the mortgage term, to accommodate changing circumstances.
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What are the disadvantages?
- There is no possibility of a lump sum at the end of the mortgage term.
- Reduction of the capital loan in the early years is slow as a result of the interest being charged.
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| MCCB and PIA regulated |
Mortgage Focus is a trading style of focuswell.com, which is regulated by the
Mortgage Code Compliance Board
and the
Personal Investment Authority. |
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