For most repayment mortgages, interest is charged on the balance outstanding at the start of the year, and the interest charged in the year will not be reduced if you make extra repayments after this date. If this applies to your account, you should retain any amounts you are planning to use to accelerate the repayment of your loan in an interest-bearing account until you make the payment shortly before the end of the year. Furthermore, in the final years of a repayment mortgage when your payments largely go to repaying capital, it may pay you to switch your borrowing to another source which takes proper account of payments in the year. Endowment mortgages With an endowment mortgage, the repayments to the lender are made up of interest on the loan only. The loan stays unchanged throughout the mortgage term.
Interest is payable on the total amount of the loan during that period.
In order to pay off the capital sum owing at the end of the loan period, you will be expected to take out a life insurance endowment policy for you or your partner. This may be provided by the lender. It is important that you ensure that this policy is kept up to date. This is your responsibility, not the lender's. There have been, after the death of a partner, many incidences of borrowers discovering that a policy had lapsed.