Paying back your mortgages - Gross profile mortgage	Constant net repayment mortgage

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Paying back your mortgages - Gross profile mortgage Constant net repayment mortgage


£124,159.60 £123,169.00

The gross profile mortgage is also more expensive if you repay the mortgage early in order to move to another property, once you take the repayment of capital into account. Its advantage lies in the lower payments you are faced with at the beginning of the mortgage.

Constant net repayment mortgages

Constant net repayment mortgages are simplicity itself -their name says it all. Assuming there are no changes in the mortgage interest rate, you pay exactly the same, month in, month out, for the whole of the mortgage term.

This is the type of mortgage most commonly offered these days by building societies -and, with many of them, you will not have a choice. If you decide on the repayment method, this is what you'll get.

Figure 1 illustrates this in graphic form, and Table 10 on webpage 56 shows what the payment will be, net of tax, at various interest rates and periods of years.

Although the payment that you make is (after tax relief) the same each year, the proportion of capital you pay does rise each year. Table 11 shows the amount of capital you pay back in each year, assuming you have taken out a £110,000 mortgage.

Because the amounts of capital you pay back are set at a higher level than under the gross profile system, you will, in the early years, be paying back the loan at a faster rate. It also means that, over the years, the total cost of the mortgage is less.

Often, of course, you don't 'see your mortgage out' but move up to a larger place after four or five years (with a new and larger mortgage to match) . Under the constant net repayment system, you will have paid off comparatively more than under the gross profile system.


More on french mortgages

Repayment mortgages or interest only - tighter purse strings


The drawback with gross profile mortgages under the MIRAS system is that they put the lender to a lot of extra work. Because the net payments rise each year, the lender has to calculate the payments and send out fresh notices to borrowers each year.

The majority of building societies refused to undertake this extra burden of administration and instead have instituted a different type of system, the 'constant net repayment' mortgage outlined below, which, as its name implies, involves constant payments over the years.

At the time of writing, a few building societies are still prepared to offer the gross profile mortgage, including the National & Provincial and the Halifax. The banks are also offering the gross profile . . .... see: Repayment mortgages or interest only - tighter purse strings


Current Mortgage Offers

  • At Commercialise Yourself you can compare mortgages using our repayment calculator, look for special offers for first time buyers or for 95% loan to value mortgages and see the most popular choices, Nationwide, Accord etc, we now even have a buy to let section for the brave or heart or strong of pocket! You can send us an email if you want to know more about mortgages and what we do and we will get back to you as soon as we are able. offers@commercialise.org.uk

     

    Finding the right mortgage can be stressful, but we’re here to help you every step of the way.

    Even if you have no proof of income, poor credit rating or facing repossession of your home, we can normally say YES (even if the high street lenders have said NO)!

    Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage. The overall cost for comparison is 7.9% APR. The actual rate available will depend upon your circumstances. Ask for a personalised illustration. There will be a fee for mortgage advice. The precise amount will depend upon your circumstances but our average fee is 2.36% of the loan value. We are authorised and regulated by the Financial Services Authority for regulated mortgage and non-investment insurance contracts.