Paying your mortgage

Planning your payments

Remember, the rate of interest is not the only thing which can affect your monthly repayments. You may find they go up or down if, for example, unpaid fees have been charged to your account.

Daily interest charging

Interest is charged on the balance outstanding at the end of each day and this means that you benefit immediately from any payments of capital. It also means that if you miss or are late with payments, interest will be charged. Interest is also charged on any unpaid fees or premiums.

First you must look at how you want to pay back the loan. There are two methods - repayment (capital & interest) and interest-only. Then there's a "part and part" mortgage - a combination of these two methods - in other words, some of it is repayment and some interest-only. You'll find we have an excellent range of mortgages with special deals available to suit most peoples' needs.

Repayment

With a repayment mortgage, your monthly payment is split - some of it goes towards paying the interest on your loan, and some towards paying off the sum you have actually borrowed (known as the "capital"). The payments are worked out so that you will have repaid all of the capital just as the mortgage term, usually 25 years, comes to an end. In the early years you will be paying mostly interest on your loan, but in the later years more and more capital will be repaid each month.

It's important to note that a repayment mortgage does not rely on the performance of an investment to ensure that the money you have borrowed is eventually repaid. As long as you meet your monthly payments during the term, your loan will be paid off in full by the end.

If you do choose repayment, we recommend that you think about taking out life assurance cover.

Interest-only

If you choose the interest-only method, you do exactly that - pay just the interest on your loan every month. When the mortgage term comes to an end, you then have to repay in full the "capital" that you owe us. This is usually done using a long-term investment such as an endowment or a pension.

It is your responsibility to ensure that you have a suitable policy in place to repay the loan and that you pay the premiums direct to the product provider.

See our section Endowments, Pensions, ISAs

We offer introductions to a financial advice service on investment choices in association with Legal & General. There is a specialist consultant available in every branch to provide the help and guidance you require.

Part and part

A combination of the above. For example, you may already have an endowment which can be used to repay part of your new mortgage. You could, therefore, arrange that part of the loan on an interest only basis and repay the remainder using the repayment method.