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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 MatchesPrepaymentsPrepaymentsPayments made in excess of scheduled mortgage principal repayments. Prepayment penaltyPrepayment penaltyA fee a borrower pays a lender when the borrower repays a loan before its scheduled time of maturity. Repayment termRepayment termThe period of time over which you will repay your mortgage to the lender. 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 periodRepayment periodThe period over which the borrower must repay the lender. Further SuggestionsFHA prepayment experienceMonthly repayment Repayment vehicle Lag response of prepayments Early repayment period Repayment plan Zero prepayment assumption Prepayment penalty Prepayment speed |
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