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This calculator works out the costs for the monthly payments of a mortgage, on both a 'repayment' and 'interest-only' basis.

 

Most mortages in the UK are issued for a term of 25 years - however you can take a loan for any period of time - the general rule is that the shorter the duration, the higher the monthly repayments. (In unusual circumstances, it may be possible to structure a loan for more than 25 years).

 

Most loans in the United Kingdom are issued on either a 'repayment' or 'interest-ony' basis. The main differences are outlined below:

 

Interest-Only: As the name implies, you only pay the monthly interest of the loan - at the end of the term, you must repay the original sum that you borrowed. Interest only payments are a lot less expensive than the 'repayment' variety - however, you must repay the capital eventually - unless you know you will have such a sum of money at the end of the term, it is necessary to fund an investment vehicle to repay the loan. Endowments have now largely fallen out of fashion, and ISA's, Unit Trusts and similar investment schemes are now used. Interest only mortgages can be inherently more risky than the 'repayment' variety, and are really suitable for those who are comfortable with the level of risk involved.

 

Repayment: Also known as 'capital and interest' mortgages - each monthly repayment comprises part repayment of the original capital, and part interest payment. The cost of such loans are greater than the 'interest-only' variety, but provide greater security and peace of mind, because at the end of the term, the loan is completely repaid.