Repayment mortgages are also known as capital repayment mortgages. Capital
is paid back gradually every month and, at the end of the term, assuming
the borrower has kept up the repayments, the loan is guaranteed to be
paid off.
Advantages
of repayment mortgages
At the end of the term, you know that the total amount of the debt
will be repaid.
Overpayments and lump sum payments into your mortgage account can
be made reducing both the interest and capital amounts repayable.
Life assurance cover is not always necessary in taking out this type
of mortgage. Although is often recommended especially if there are
two borrowers or their are children to consider.
Disadvantages
of repayment mortgages
There may be financial penalties for making lump sum/overpayments
into your mortgage account.
In the early years of a repayment mortgage the majority of the monthly
repayment is interest rather than capital. For borrowers moving house
regularly, this can result in little of the capital being paid off.
This content of this site is for
information purposes only, as a plain speaking introduction to mortgages.
No claim to the accuracy of information on this site is made and you
are strongly advised to verify information presented
here with a qualified advisor before making any financial decisions
based on this information.
Advantages
of repayment mortgages
Disadvantages
of repayment mortgages