The most straightforward form of mortgage repayment with capital and interest paid off monthly from day one. It works just like an ordinary personal loan except over a longer term. In the early years, you repay mostly interest, with a smaller proportion of the payment being made against the loan. Over time, however, this ratio changes with the proportion of capital repayment increasing and interest reducing until the loan is paid off.
Advantages
It is simple, straightforward and easy to understand. Unlike with other mortgages, there is no risk associated with investing in the stock market. You are guaranteed to have the loan repaid at the end of the term provided all payments are met.
Disadvantages
Unlike with other mortgages, repayment loans do not give you the opportunity to benefit from a rising stock market. Also, when moving house, people usually take out a 25 year repayment mortgage each time to help keep monthly costs down. This extends the period for repaying the debt. |
