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Repayment plan |
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Repayment planWhen a borrower falls behind in mortgage payments, many lenders will negotiate a repayment plan rather than go to court.Repayment plan Similar MatchesRepayment vehicleRepayment vehicleThe means by which a mortgage loan's capital is repaid. Examples include endowments, ISAs and personal pensions. Prepayment penaltyPrepayment penaltyLenders can impose a penalty on a borrower who pays a loan off before its expected end date. FHA prepayment experienceFHA prepayment experienceThe percentage of loans in a pool of mortgages outstanding at the origination anniversary, based on annual statistical historic survival rates for FHA-insured mortgages. Repayment mortgageRepayment 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. PrepaymentsPrepaymentsPayments made in excess of scheduled mortgage principal repayments. Further SuggestionsEarly repayment periodPrepayment penalty Repayment mortgage prepayment fee Lag response of prepayments Repayment period Prepayment speed Monthly repayment Zero prepayment assumption Repayment term |
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