What is a mortgage with repayment at the end of the term?
Article ID: 132 | Last Updated: Thu, Dec 8, 2011 at 8:05 PM
Mortgage with repayment at the end of the term
There are three basic types of end term repayment mortgage:
With the savings mortgage you only pay the interest on the mortgage amount and a premium into a savings account. This is more expensive than with the investment mortgage, but you have more assurance of paying off the mortgage at the end of the term. Since there are no repayments during the term the interest amount remains at the maximum level, leading to the highest tax benefit. The mortgage will be paid off at the end of the term with the saved capital on the savings account. This capital is guaranteed. You save with a guaranteed return: the interest you receive on your savings account is the same as the interest you pay on the mortgage. The total monthly payments will therefore not vary a lot.
With the investment mortgage you only pay the interest on the mortgage amount and a premium into an investment fund (stocks and shares). This is a more risky option than the savings mortgage. It is also possible to invest savings as a lump sum at the beginning of the term and then you don't pay the premium each month. The interest will stay the same every month, so will the repayments. The end capital is not guaranteed.
Life insurance mortgage
With the life insurance mortgage you also only pay the interest on the mortage. Besides that you pay a monthly premium to the insurance company to build up a capital. This is however less transparant than a savings mortgage and the end capital is not guaranteed.