Repayment
mortgages are probably the oldest and simplest type of loan
around. Despite a number of new variations on the repayment
concept having been introduced in recent years, the basic principles
have not changed, and a repayment mortgage is still one of the
best ways to purchase a home.
A
repayment mortgage is probably the simplest kind of home loan
available. It works like this:
Borrow an agreed amount
Make
repayments on a fixed schedule, including interest
At
the end of the mortgage term, you will owe nothing and will
own your home outright
The
capital
sum is the money you originally borrowed, and you
repay a part of this each month.
The
interest
payment can vary over time, depending on whether
your mortgage's interest rate changes, and how much you owe.
Whether
your total monthly payment varies each month may also depend
on your mortgage type. If you are on a fixed rate mortgage,
your total monthly payment will be fixed for the duration of
the fixed rate.
If
you are on a mortgage with a variable rate, such as a tracker,
discount or capped rate mortgage, your payments could potentially
vary (up OR down) every month, if your bank or building society
changes their interest rates.
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