Repayment Types

In the UK, there are three main types of mortgage repayment:

1. Capital and Interest Repayment (Repayment Mortgage): Borrowers make monthly payments that cover both the loan amount and the interest. The mortgage is fully repaid by the end of the term, and it is considered a low-risk option.

2. Interest-Only Mortgage: With this method, the monthly payments only cover the interest charged by the lender. The loan amount remains unchanged throughout the term. However, a separate plan is needed to repay the capital, which introduces the risk of a potential shortfall.

3. Part and Part Mortgage (Mixed Mortgage): Borrowers make monthly payments that cover both the interest and a portion of the loan amount. This option offers some flexibility, but a separate plan is still required for the remaining capital, which carries the risk of falling short.