Repaying a Mortgage

Repaying a Mortgage

There are two ways to repay your mortgage: the capital and interest repayment route or the interest-only method.

Repayment Mortgage

Widely considered to be the safest choice, borrowers repay the interest and part of the capital every month and gradually reduce the total amount owed. Providing payments are maintained, the loan will be repaid in full at the end of the mortgage term.

Interest-Only Mortgage

With the interest-only options, monthly repayments are comprised solely of interest due to the lender. Arrangements will need to be made to ensure that the capital can be repaid in full at the end of the mortgage term. Many borrowers choose to set funds aside or arrange an investment contract. This is a more speculative method of repayment that relies on the investment return to meet its target.