Repayment Mortgage

A Repayment mortgage (also known as a capital and interest mortgage) is a UK term used to describe a mortgage made up of monthly payments consisting of capital and interest payments over the term of the mortgage.  Each year the lender will send a mortgage statement showing the borrower what payments were made and how much of each payment went to capital debt reduction and how much went to interest payments.

Most people who choose repayment mortgages choose them because they want certainty that the mortgage debt will be paid off at the end of the term provided they have made normal monthly payments.  Investment backed mortgages such as endowments do not provide this certainty because they rely on stock market performance.

During the early years of a repayment mortgage the bulk of monthly payments goes to paying back interest whereas the later years payments consist mainly of capital payments.  In other words, in the early years of a repayment mortgage you will not see much debt reduction.