Repayment mortgages

Updated 18th August 2022

Repayment mortgages are the most popular type of UK mortgage. Unlike interest only mortgages, with a repayment mortgage your monthly payments go towards both the loan and the interest. This means that by the end of the mortgage term, you will own your home with nothing more to pay.

The following information explains how this type of mortgage works, the options available and how to choose the best repayment mortgage for you.

What are repayment mortgages and how do they work?

A repayment mortgage is a loan secured against your property for a defined period, known as the mortgage term. As your monthly repayments repay the capital and interest, you’re guaranteed to repay the whole loan by the end of the mortgage term, assuming you’ve kept up with your mortgage repayments

At the start of the mortgage the biggest percentage of your repayments goes towards the interest rather than the capital. Therefore, the loan can appear slow to repay. However, over time the balance shifts and more of your monthly payments will go towards clearing the capital.

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What happens at the end of a repayment mortgage?

At the end of a repayment mortgage you’ll own your home. This is assuming you’ve kept up with your mortgage repayments and haven’t made overpayments or extended your mortgage term. Your lender will then remove their charge against your property and for a fee, return the title deeds where relevant.

What types of repayment mortgage are there?

There are several types of repayment mortgage to choose from. If you prefer the guarantee of certainty, a repayment mortgage with a fixed interest rate could be worth considering. However variable rate repayment mortgages, including tracker, discount and capped mortgages could offer a risker but more rewarding alternative.

Whichever type of repayment mortgage you choose, just remember you don’t have to stick with it for the duration of the mortgage term. Remortgaging to a better deal maybe worthwhile, especially as you will have access to lower interest rates the more the equity in your property grows.

What are the advantages of a repayment mortgage?

There are several advantages of repayment mortgages:

  • The interest is lower compared to interest only mortgages as it reduces throughout the mortgage term
  • You’ll have flexibility to remortgage to better deals with lower interest rates as the size of your loan reduces
  • You are guaranteed to own your property when the mortgage term ends if you keep up with your mortgage repayments

What are the disadvantages of a repayment mortgage?

Although repayment mortgages are the most popular UK mortgage, there are a couple of disadvantages to consider:

  • As your initial repayments are largely towards the interest and not the capital, if you choose to remortgage or pay off the debt within the first few years, the size of your loan may have hardly changed
  • Monthly payments are higher compared to interest only mortgages as you are repaying the interest and the capital

Higher monthly repayments can mean that some borrowers may struggle financially, which is where a mortgage repayment calculator could help.

What is a mortgage repayment calculator?

A mortgage repayment calculator shows you how much your monthly mortgage repayments will be based on how much you want to borrow, interest rates and fees. Some mortgage repayment calculators also show how much you could borrow based on your income.

So, a mortgage repayment calculator is a great place to start however it also helps to get expert advice on the best type of mortgage for you. This is where UK mortgage brokers like London & Country, Habito and Trinity Financial can help as they offer their services and guidance for free.

What are part and part mortgages?

Part and part mortgages are a combination of interest only and repayment mortgages. On the repayment part of the mortgage, you repay both the interest and the capital monthly. Whereas on the interest only part of the mortgage, you will only repay the interest.

So, with a part and part mortgage, you benefit from lower monthly repayments compared to a full repayment mortgage. And as the capital is reducing, your interest will be less than with a full interest only mortgage.

However, as part of the loan will still be outstanding at the end of the mortgage term, you will also need to have a repayment vehicle in place.

Is a repayment mortgage the best way to repay your mortgage?

A repayment mortgage could be the best way to repay your mortgage if you want to ensure your loan is repaid by the end of the mortgage term. Repayment mortgages are also usually cheaper as the amount you owe and therefore the interest decreases each month.

However, keeping up with your monthly repayments is essentially, which is why it is important to seek advice from qualified mortgage brokers on the best mortgage for you.

What should I do now?

If you want free advice on repayment mortgages, London & Country can talk you through your options and help you compare the best repayment mortgages.

Alternatively, if you want to know more about mortgages for over 50s, interest only mortgages, lifetime mortgages and equity release, read our helpful guides.

Compare repayment mortgages

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