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A repayment mortgage is a type of mortgage that most people often consider. The idea behind a repayment mortgage is that you pay monthly for a defined period and each mortgage payment consists of an element of capital and interest.
A repayment mortgage is one for which each monthly payment contributes to the capital and the interest that is to be repaid over the term of the mortgage. Assuming that the contractual payment is made each month for the full duration term of the mortgage, at the end of the term the mortgage will be fully paid for.
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More About Repayment Mortgages
What does a Repayment Mortgage mean A repayment mortgage means your monthly payments consist of both the capital amount borrowed together with interest. Your lender will keep you advised about how much you have repaid. Initially, most of your monthly payment pays off the interest and what’s left goes towards reducing what you’ve actually borrowed. As time goes on, the ‘balance’ changes and as the interest charges reduce, more and more of your monthly repayment is used to reduce the Finance.
A repayment mortgage is a mortgage contract under which the customer is obliged to make payments of interest and capital which are designed to repay the mortgage over the agreed term. As long as you maintain the payments, the whole Finance will be paid off over the term of the Finance. Many people opt for a repayment mortgage on for this very reason – a repayment mortgage is the safest option as it means that you will have that guarantee. With a repayment mortgage the entire mortgage is paid back over an agreed period of time.
This is referred to as the mortgage’s term and is usually set at 25-30 years. When the mortgage’s term has come to its end, providing all the repayments have been met, the property will be in the hands of the homeowner. A repayment mortgage means that each month you make a payment to your lender which consists of both a repayment of part of the Finance and a payment of the interest on your Finance.
You are reducing your debt every month, and as a safeguard you will need to arrange life assurance or ASU, which is often a compulsory requirement with mortgage lenders so that should you die before the end of the term your mortgage will be paid for. Deciding which mortgage is best for you depends on a few factors, which is why it’s important for you to do your financial homework first.
Repayment mortgages are regarded as the safest option, hence their appeal to the more cautious investor. They are certainly much easier to understand and you should have no trouble working out your monthly incomings and outgoings. As time goes on, the equity % in the property increases. However, in the early years of the repayment mortgage the bulk of the mortgage repayments consist of the interest component, so not alot of the capital is actually paid off for some time. Here at a mortgage 4 you we can help you apply for a repayment mortgage, even if you have bad credit or other circumstances against your name.