How to find the right repayment mortgage
Finding the lowest mortgage interest rate is important when you search for the best repayment mortgage, but you should also think about:
The type of repayment mortgage you want
How much you need to borrow
How long you need to repay your mortgage
Decide on a mortgage type
There are two main types of repayment mortgage:
Interest only mortgage: Your repayments only pay the interest on the mortgage and do not reduce the total balance you owe.
Repayment mortgage: Your monthly repayments go towards paying both the monthly interest and the mortgage amount itself, reducing the total amount you owe.
Once you have decided on a type, decide if you want a fixed or variable interest rate:
Fixed rate: You pay the same amount at a fixed interest rate each month for a certain number of years e.g. repayments are fixed at 2% for three years
Variable rate: Your repayment amount can change each month. Whether the amount goes up or down depends on any changes to the Bank of England base rate.
Here is more information on the different types of mortgages.
Should you get an interest only or repayment mortgage?
Work out how much you need
To find the right repayment mortgage for you, work out the amount you need to borrow.
Your repayment mortgage will need to match your loan to value (LTV), which is how much you owe compared to the value of the property.
For example, for a house worth £250,000, a mortgage of £150,000 equals an LTV of 60%
This comparison shows you the LTV offered by UK mortgage providers.
Calculate what you can afford
Next work out how much you can afford to repay each month. To calculate this:
Work out much comes into your account e.g. salary and pensions
Add up how much goes out of your account e.g. fuel, holidays, gym membership
Take away your total outgoings from your total income
Here is how to work out if you can afford a mortgage.
Choose a mortgage term
Once you know how much you can afford, consider the mortgage term you need.
A shorter mortgage term means you may have higher monthly repayments. While a longer term can mean lower monthly repayments, but you will pay more overall in interest.
For example, a mortgage of £100,000 at an interest rate of 5% over 25 years costs £585 a month and £175,377 overall. Over 35 years it is £505 a month and £211,969 in total.
Get advice
Finally, before you apply you could choose to get impartial advice from an FCA registered independent financial adviser.
Although they charge for their services, they can help you choose the best repayment mortgage for your circumstances.
Once you've made a decision, you can start your application:
Online
Over the phone
In branch
Here is more information on repayment mortgages
