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Types of loans.
What is the difference between loans for short term borrowing?
There are two types of loans for short term borrowing; fixed
amount with fixed repayments. And flexible.
Fixed amount, fixed repayments speaks for itself; you
borrow a fixed amount of money at an agreed fixed interest
rate. The repayments are fixed throughout the loan and don't
differ.
It is possible to borrow a fixed amount of money at a variable
rate of interest, thus your repayments may vary during the
term of the loan.
Flexible allows borrowing to a pre-defined limited
and you may borrow any amount of money, up to that limit,
equally you can be flexible with repayments … within
the minimum amount.
Types of mortgages
What is the difference between mortgages?
There are two types of mortgages; Repayment Mortgages and
Interest Only.
Repayment Mortgage
Simple, you may your payments on time over the fixed period
and the property becomes yours … guaranteed.
Behind the scenes your mortgage debt is divided into two parts,
capital repayment and interest repayment. Money payments over
the interest payments are paying off the capital.
Interest Only Mortgages
Simple, your repayments cover the interest only and none
of the capital debt is being repaid.
Previously mortgage providers would insist on you investing
into a fund that will pay off the capital at the end of term.
Hopefully it will leave a surplus. This arrangement would
have been an endowment, not flavour of the month today! However
your financial advisor may
Your home is at risk if you do not repay the full mortgage
amount on time.
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