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Repayment vehicle |
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Repayment vehicleThe means by which a mortgage loan's capital is repaid. Examples include endowments, ISAs and personal pensions.Repayment vehicle Similar MatchesZero prepayment assumptionZero prepayment assumptionThe assumption of payment of scheduled principal and interest with no payments. PrepaymentsPrepaymentsPayments made in excess of scheduled mortgage principal repayments. Lag response of prepaymentsLag response of prepaymentsA delay of typically about three months between the time the weighted-average coupon of an MBS pool crosses the threshold for refinancing and observation of an acceleration in prepayment speed is observed. Prepayment penaltyPrepayment penaltyLenders can impose a penalty on a borrower who pays a loan off before its expected end date. 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. Further SuggestionsRepayment mortgageFHA prepayment experience Prepayment speed Prepayment penalty Repayment plan Early repayment period prepayment fee Repayment period Repayment term Monthly repayment |
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