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Mortgage Repayment Methods (Interest-only Mortgage (Key features (No…
Mortgage Repayment Methods
Capital Repayment Mortgage
Capital and interest payments
Decreasing term
Higher interest less capital repaid
Lower interest high capital repaid
Interest-only Mortgage
Key features
No capital repayment
Interest paid during term
Repayment vehicle required
Capital repaid via lump sum
Lower monthly mortgage repayments
MCOB Rules
MCOB 4.7a
Credible repayment strategy
Savings/ investments
Regular bonuses
Sale of another property
Non-credible repayment strategy
House price inflation
Future inheritance
Windfalls
MCOB 11.6.4.9
Required to review repayment strategy at least once
Pure interest-only mortgage
No repayment vehicle
Mortgage Interest Calculation
Annual rest
Interest calculated annually at year start
Payments credited annually in arrears
Slowest debt reduction
Monthly rest
Interest calculated monthly at month start
Payments credited monthly
Less interest over the term
Daily rest
Interest calculated daily
Payments credited immediately
Quickest debt reduction
Annual Percentage rate of charge (APRC)
Total charge of credit (TCC)
Total interest payable
Arrangement/admin fees
Lender conveyancing fees
Valuation fees
Higher lending charges
Redemption fees
Compulsory insurance premiums
Second APRC
Interest/charges are variable
Rises to capped limit at earliest point
Variable rate - highest point prev. 20 years
Base rate - highest point prev 20 years