repayment mortgage

What is it?

With a repayment mortgage - also known as a capital and interest mortgage - your monthly payments gradually pay off both the capital amount you owe and the interest you are being charged on your mortgage loan.

What does it offer?

Repayment mortgages are straightforward. If you meet your payments, your overall debt will reduce and at the end of the mortgage term your loan will be fully paid off.

When is it worth considering?

If you want some certainty about your mortgage a repayment deal is the best option. It can make your financial affairs simpler than an interest-only mortgage because you don’t have to think about how you’re going to cover the cost of the capital element of your mortgage.

What should I be aware of?

During the early years of your mortgage most of each monthly payment will go towards the interest of the loan, but as the mortgage nears the end of the term the majority of the payment will go towards capital repayment.

If interest rates are low the portion of your repayment that is reducing the capital element of your mortgage could be earning you a better return elsewhere.