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.

It's essential for borrowers to understand the risks associated with each repayment type. Seeking advice from mortgage advisors, like Austin Friars Financial, can help in making the right decision based on individual needs and goals.