Repayment Mortgage

In order to pay off your mortgage and own your house outright you will need a repayment mortgage. In this case your monthly payments don’t just pay off the interest accrued; they also go towards repaying some of the original capital borrowed.

The amount you pay back each month is decided by the mortgage term, total borrowed and the interest rate. If you have a fixed interest rate, your monthly repayments will be exactly the same every month for the remainder of the fixed rate period, helping with managing your money and budgeting. However, you can still opt for a repayment mortgage on a variable rate but your monthly payment will vary, and earlier repayments will be heavily focused on paying interest rather than capital.

When searching for a repayment mortgage it is really important that you find one with the best rate of interest, but there are also other things to consider. Rite Financial has plenty of experience with repayment mortgages and can provide you with the knowledge you need to make a fully informed decision.

As earlier in the mortgage term your repayments will largely go towards paying interest accrued rather than the capital, it is wise to look at how much of your mortgage you are paying off. Sometimes it can be beneficial to opt for a mortgage with a slightly higher rate of interest, but one that makes a dent into your mortgage earlier rather than later.

There are some significant advantages to a repayment mortgage, namely that you have the guarantee that your mortgage will be completely paid off by the end of the period, as long as you have met all your commitments. This means that you are far less likely to suffer from negative equity and also removes the risk on investments in the stock market.

If we assume that the value of your property either increases or stays the same, and does not decrease in value, you will start to see a boost in the equity in your property. This will definitely help when you need another mortgage to move home or to re-mortgage your existing property.

There are of course disadvantages to repayment mortgages, for example, if the stock market were to perform particularly well over the term, you would not be able to benefit from it. This might not sound like a big problem but it would rid your opportunity of paying off your mortgage earlier, unlike an endowment mortgage.

You also need to consider that if you wanted to move home again you might need to take out another 25 year repayment mortgage as you will have only paid off a small amount of capital on your existing mortgage.

By contacting Rite Financial we can discuss your personal circumstances and find out whether a repayment mortgage is right for you. Understanding the terms of your mortgage agreement is incredibly important with a repayment mortgage as you need to be aware of the percentage split between interest and capital.