01912303358 info@ksm-associates.co.uk

The repayment of capital

There are many ways to actually repay the capital you borrow.

You can pay some of it back each month, slowly reducing the amount you owe (a repayment mortgage), or set the money aside in an investment such as an ISA, which can be used to repay the capital at the end of the term (an interest-only mortgage).

The amount you have to save, or the rate at which you repay the debt, depends on the term of the mortgage and, (if you are using an investment) the growth rates actually achieved.

The repayment route is the safest as you can be sure that the mortgage will be paid off at the end of the term, provided all payments have been made in full and on time.

Alternatively, with the interest-only route, an investment may be used to generate a fund with the aim of paying off the mortgage and generating a surplus. However, if growth is lower than expected there may be a shortfall. The investment route cannot normally offer a guarantee of debt clearance, as the value of the investment can go down as well as up and you may not get back the full amount invested.

We have created a range of useful calculators to help you explore the options open to you.

When using these it is best to be conservative in your assumptions about growth. For your information the Financial Conduct Authority's maximum allowed growth rate for official projections of tax efficient investments like ISAs is 9 per cent per annum.

Part of a mortgage adviser's role is to help you choose the most appropriate method of capital repayment.

A mortgage is secured on your home,  your property may be repossessed if you do not keep up repayments on your mortgage.

Chartered Institute of Insurers Logo    Institute of Financial Planning Logo    Personal Finance Society Logo

KSM Associates Independent Financial Advisers Ltd is authorised and regulated by the Financial Conduct Authority. Financial Services Register No: 209562 http://www.fca.org.uk/register.

KSM Associates Independent Financial Advisers Ltd Registered Address: 6 Beaumont Street, Hexham, Northumberland, NE46 3LZ. Registered in England & Wales, No. 02619472.

Neither KSM Associates Independent Financial Advisers Ltd nor its representatives can be held responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

The Financial Conduct Authority does not regulate National Savings or some forms of mortgage, tax planning, taxation and trust advice, offshore investments or school fees planning.

The information contained within this site is subject to the UK regulatory regime and is therefore targeted primarily at consumers based in the UK.

The Financial Ombudsman Service (FOS) is an agency for arbitrating on unresolved complaints between regulated firms and their clients. Full details of the FOS can be found on its website at www.financial-ombudsman.org.uk

Please read our Privacy Statement before completing any enquiry form or before sending an email to us.