• Repayment Types

  • Capital Repayment

    A repayment mortgage is a term generally used to describe a mortgage in which the monthly repayments consist of repaying the capital amount borrowed as well as the accrued interest, so that the amount borrowed decreases throughout the term and by the end of the loan term has been fully repaid.

    One advantage of a repayment mortgage is that it removes the risk of having an investment (as exists with an interest only mortgage), the performance of which is dependent on the stockmarket. The borrower is also less likely to suffer from negative equity because the mortgage balance will be reducing month on month.

    As time moves on, the equity percentage in the property increases. However, in the early years the bulk of the mortgage repayments consist of the interest component, so not much of the capital is actually paid off for some time.

    Interest Only

    Interest-only mortgage – where the payments to the lender cover interest only. No capital is repaid, so that the full amount of the loan is still outstanding at the end of the mortgage term.

    The mortgage lender will require that an approved investment / plan to repay the capital at the end of the loan period exits. These can be via an Endowment policy, stocks & shares ISA, Pension and in some cases via the sale of the mortgaged property.

    Part & Part

    Simply put, a part & part mortgage is where you have a portion of your mortgage on a repayment basis with the remainder as interest only.

    Offset Mortgage

    An offset mortgage links your mortgage with your savings and, sometimes, your current account. Your credit balances are offset against your mortgage debt so you only pay interest on the difference. 

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