Repayment Mortgage

This is the old faithful of mortgages, which despite all the gimmicks and fashions has kept its place as one of the most popular forms of borrowing for a house.


With a repayment mortgage, you agree to pay back a sum of money plus interest over a fixed number of years, with all the debt cleared at the end of the life of the mortgage. Unlike endowments or any stock market-related  mortgage, you can be sure that at the end of the agreed repayment period all the debt will be paid.


Repayments come with a number of different features, such as fixed rates and capped rates, but the same basic principle applies. You're agreeing to pay back a loan plus interest, with the debt divided up into monthly payments stretching out over the next 20 or 25 years.


For the first years of a repayment mortgage almost all payments go into interest, which is a bit depressing when you read your statement and discover after a year of paying thousands of pounds you only owe a hundred quid less than when you started. The capital sum is mostly cleared in the later stages of a repayment mortgage.


If you haven't got a mortgage that sets a limit on interest rate rises, such as a fixed or capped rate, then the amount you pay back each month can change over the life of a mortgage, depending on the ups and downs of interest rates. Once the fixed or capped period ends, then you'll be cast out on the open sea of variable rates. And if rates are rising ,then your monthly repayment will also go up. Looking on the brighter side, if interest rates go down, you'll be paying less than you might have expected. Just because a repayment is the Steady Eddy of mortgages, it doesn't mean that your monthly mortgage payment won't be liable to change.