Repayment Mortgages - Should I Have an ISA or Repayment Mortgage? - By: Jason Haines

A repayment mortgage is a type of mortgage that allows the borrower to pay back both the amount borrowed and the interest which accrues on a mortgage. This type of mortgage is repaid over a set period of time and as long as the borrower has made the correct repayments at the right time the mortgage is paid off in full by the end of the term.

When a repayment mortgage is first taken out and repayments are made these repayments go to paying off the interest. As time goes on and more repayments are made the interest will be paid and all payments will go towards reducing the outstanding balance of the amount owed.

If you take out a repayment mortgage it is good to know that if you get into difficulties with your monthly budgeting you can extend the period of your mortgage and reduce your repayments. Some people even have their repayment mortgage for as long as 35 years. However on the other hand if you find that you can make larger repayments each month you can contact your lender and reduce your term.

Pros and Cons of a repayment mortgage

Pros
Unless your house reduces in price you will find that the more you have paid towards your repayment mortgage the more equity you will have in your home. As a result you may find it easier to get another mortgage should you decide to move house or remortgage.
As long as you are making your mortgage repayments for the correct amount and do not default you will be guaranteed to pay off your mortgage by the end of its term.
As your mortgage balance will reduce each month you are not likely to experience negative equity.

Cons
If you decide to move and in the first few years of having your repayment mortgage you will only have paid off interest on your mortgage. This means that you will probably have to take out another 20 year repayment mortgage in order to afford the monthly repayments.

Repayment of ISA Mortgages
A cautious investor will always choose a repayment mortgage over an ISA mortgage as they are guaranteed to repay their mortgage with a repayment mortgage. With interest rates at an all time low some people are choosing to reduce their mortgage term buy keeping their mortgage payments the same as their interest rate goes down.

For more information on repayment mortgages you can speak to trained mortgage advisors who are on hand to give hassle free advice on mortgages. Or you can visit one of the many online mortgage comparison websites you will have more information on the different types of mortgage repayment options.

An article looking at the benefits of a repayment mortgage over an investment backed mortgage.

Jason Haines is a protection and mortgage advisor at godirect.co.uk, here you can get instant cheap life insurance and mortgages online information.