About repayment mortgages

When you arrange your mortgage loan, you decide how you wish to pay it off each month. There are two main methods: repayment mortgage and interest only mortgage.


If you would like the reassurance of gradually clearing your loan each month, then repayment is the method for you. This method often suits first time buyers, who require the security of a simple system to enable them to budget easily.

Each month, you pay back some of the capital and the interest on the loan. At the beginning you pay more interest than capital, but eventually you begin to pay off more of the capital.

With a repayment mortgage, you don’t have to run the risks involved with an investment-linked loan such as endowment or ISA linked mortgages.  However, these can be suitable for some borrowers.

If remortgaging, try to avoid the temptation of keeping the term at 25 years to afford the repayments and instead reduce the term to get rid of your loan quicker. When the repayment mortgage has run its term, it’s over. And for some people, that’s highly satisfying.

See also:
Mortgages made easy
Best buy mortgages
Mortgage calculators online
Interest only mortgages
100% mortgages

 

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