Repayment mortgages explained
Repaying the interest and capital over the term of the mortgage
A repayment mortgage is where the borrower is required to make regular interest and capital repayments over the term of the
mortgage. The amount of the repayments are normally calculated to ensure the loan is fully repaid at the end of the mortgage term.
Through the course of the mortgage the loan shrinks. But the repayments stay the same because at the start of the term
the bulk of your repayment is made up of interest payments with that slowly reversing to the bulk being made up of capital repayments
through the term of the mortgage.
There are two very clear advantages with repayment mortgages,
- At the end of the term the mortgage will be repaid without further liability
- Through the mortgage term the loan shrinks so should you have to sell for any reason through the term
of the mortgage, particularly later on in the term, you will not owe what you borrowed.
YOUR HOME MAYBE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE