Repayment mortgage

A repayment mortgage is a term generally used in the United Kingdom to describe a mortgage in which the monthly repayments consist of repaying the capital amount borrowed as well as the accrued interest, so that the amount borrowed decreases throughout the term and by the end of the loan term has been fully repaid. This contrasts with an interest-only mortgage (such as an endowment mortgage or some types of balloon payment mortgage) where monthly repayments are for interest, and the borrower must repay the full loan at term in a lump sum.

One advantage of a repayment mortgage is that it removes the risk of having an investment (as exists in an endowment mortgage), the performance of which is dependent on the stockmarket. The borrower is also less likely to suffer from negative equity because the mortgage balance will be reducing month on month.[1][2]

As time moves on, the equity percentage in the property increases. However, in the early years the bulk of the mortgage repayments consist of the interest component, so not much of the capital is actually paid off for some time.[3][4]

## See also

* UK mortgage terminology

## References

1. ↑ "Mortgage Types Guide" (in en-GB). https://residentialmortgagehub.co.uk/mortgage-types-guide/.
2. ↑ "Blackrock Unconstrained Equity Fund". https://www.sec.gov/Archives/edgar/data/1324285/000119312522066071/d268799d497.htm#xx_c7913e89-6323-410e-b2fd-51bcc186ac07_46.
3. ↑ "Repayment mortgages explained" (in en). 2022-10-24. https://www.total.nz/tools/mortgage-repayment.
4. ↑ "What is a capital repayment mortgage?" (in en). https://interlincmortgage.com/waldorf.

* v
* t
* e

Mortgage loan

Financial literacy

Interest rate type|

* fixed-rate mortgage
* adjustable-rate mortgage / variable-rate / floating rate

Repayment type|

* Continuous: Repayment mortgage / self-amortized
* Repayment at term: interest-only mortgage (endowment mortgage)
* No repayment: reverse mortgage
* Hybrid: balloon payment mortgage
* equity release (shared appreciation mortgage)

Variable payment|

* flexible mortgage (offset mortgage, mortgage accelerator)
* graduated payment mortgage loan

Other variations|

* buy to let mortgage
* foreign currency mortgage
* foreign national mortgage
* wraparound mortgage

Key concepts|

* Annual percentage rate (APR)
* Foreclosure / Repossession

0.00

(0 votes)

Original source: https://en.wikipedia.org/wiki/Repayment mortgage. Read more

|

Retrieved from "https://handwiki.org/wiki/index.php?title=Finance:Repayment_mortgage&oldid=37506"
*[v]: View this template
*[t]: Discuss this template
*[e]: Edit this template