How do I repay a Mortgage?

There are two ways that a lender will allow you to repay a mortgage. Either through an ‘interest only’ mortgage or a ‘repayment’ mortgage.

Interest only mortgage

With an interest only mortgage, you will only make monthly payments on the loan that match the interest you are being charged.

You will not be paying any of the capital that you have borrowed back.

For example, if you have borrowed £100,000 to help you buy your house, then you will still owe that £100,000 at the end of the term of the mortgage at which time you will be required to pay that amount in full. Most borrowers in this situation have had some kind of alternative payment plan in place or sell the property.

Repayment mortgage

A repayment mortgage is the most common type of mortgage and your monthly repayments will consist of both interest and capital payments. In the early years of your mortgage the vast majority of your monthly repayment will be interest and you will see with your annual mortgage statements that the amount you owe is reducing slowly. Over time this will change, and the rate at which your loan reduces, accelerates until you have finally paid off the whole amount at the end of the mortgage term.