Repayment Options
Repayment mortgages |
Term | Advantages
| Disadvantages
Introduction To Repayment Mortgages
Repayment mortgages are the most traditional and widely
used way of returning borrowed money to mortgage lenders.
Simple and easy to understand, it is generally accepted
that they also offer the most risk-free route to clearing
your mortgage debt.
Each month you will make a single repayment to the mortgage
lender. Part of it will be an interest charge on the outstanding
balance of the mortgage and the rest of it will go towards
reducing your debt.
Unless interest rates change or your introductory offer
period ends, repayments will stay at the same amount each
month. If the interest rate payable on your mortgage changes
for some reason, then the cost of your repayments is altered
so that the loan is still repaid at the end of the specified
term.
In the early years of a repayment mortgage, the bulk of
the monthly repayment is taken up with paying interest on
your debt to the lender. Only a small portion of the sum
you pay out will be used to reduce the amount of capital
that you owe. As your debt slowly starts to fall, so too
does the amount of interest you will owe the lender each
month. Smaller interest charges mean that more of your loan
is used to repay the capital, reducing the outstanding balance
faster and faster as time goes on.
