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Repayment mortgage |
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Repayment mortgageEach month you will make a repayment to the mortgage lender. Part of this payment will go towards reducing the total amount of capital you owe and part of it will be an interest charge on the remaining balance of the mortgage. Unless interest rates change or your introductory offer period ends, you pay the same amount each month. When one of these things does happen, repayments are altered so that the loan is still repaid at the end of the specified term.Repayment mortgageA mortgage where throughout the term, regular payments (usually monthly) are made to partly repay interest on the capital and to partly repay the capital itself (the amount of the loan).Initially the largest proportion of the repayments will be used to pay interest since the capital amount outstanding is at its highest value. Therefore over the initial years the capital will not reduce very much. However as the years proceed more and more of the monthly repayments will be applied to reducing the capital until towards the end of the term the large proportion will be paying off capital and a small proportion paying interest.In the event that interest rates rise then often the monthly repayments will rise accordingly. Alternatively, to keep the same monthly repayments the term will need to be extended. If interest rates fall then the reverse applies. It is usually a requirement of the lender (that is, a building society or bank) providing the mortgage that the borrower takes out life assurance so that repayment is made in the event of his/her death during the term.Similar MatchesMonthly repaymentMonthly repaymentThis is the amount you pay to your lender each month towards the cost of your loan. Prepayment feePrepayment feeIn the US, a fee charged to a borrower by a lender when a loan or mortgage is repaid ahead of schedule. In the UK, building societies impose a similar charge, typically binding the borrower to at least three years of repayments if such a charge is to be avoided. Repayment planRepayment planWhen a borrower falls behind in mortgage payments, many lenders will negotiate a repayment plan rather than go to court. Prepayment penaltyPrepayment penaltyLenders can impose a penalty on a borrower who pays a loan off before its expected end date. Prepayment speedPrepayment speedAlso called speed, the estimated rate at which mortgagors pay off their loans ahead of schedule, critical in assessing the value of mortgage pass-through securities. Further SuggestionsFHA prepayment experiencePrepayment penalty Repayment term Repayment vehicle Prepayments Lag response of prepayments Early repayment period Repayment period Zero prepayment assumption |
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