Repayment Mortgage

A repayment mortgage is a type of mortgage where the monthly payments consist of a proportion of the original amount borrowed (known as the capital) plus a proportion of the interest owed.

Repayment mortgages are also commonly known as capital and interest mortgages due to the nature of these payments. This differs from an interest only mortgage where only the interest is paid off during the term of the mortgage.

You can compare a vast range of repayment mortgage deals, and find the best one for you, using our free online mortgage comparison tool below.

What are the features of a repayment mortgage?

• To begin with, your repayments will be mainly interest which can be inconvenient if you want to move again in the short term as the amount you owe will not have decreased by much at this point. However, for those looking for long-term security, a repayment mortgage can be an option to consider because the amount borrowed decreases throughout the term and by the end of the loan term has been fully repaid.

• You are less likely to end up in negative equity because the mortgage balance will be reducing every month and, as the years on the mortgage go by, 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.

• Once the mortgage is all paid off, you will own your property outright , because as long as you make all your repayments, there is no risk of not being able to pay off the mortgage.

• Unlike interest-only mortgages, repayment mortgages are not reliant on the investments you have planned to pay off the capital sum will be successful.

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