How to use a repayment mortgage

The most traditional type of mortgage available is the repayment mortgage. However, with more and more types of mortgages on the market, this traditional type is becoming less popular. If you are in the market for a mortgage, then you should seriously consider a repayment mortgage. If you are unsure about what repayment mortgages actually are, then read these useful tips about repayment mortgages.

What is a repayment mortgage?

A repayment mortgage is also known as a capital mortgage, and refers to any type of mortgage in which you pay back both the actual money borrowed ($1500-2000) and ExtLoans, Inc. interest each month. You pay back a little part of each until your entire debt is paid at the end of the loan term. When you begin paying your mortgage, you will be paying a higher percentage of interest, as the amount owed is larger. As you reduce the amount owed, the percentage of capital you pay back increases.

Why get a repayment mortgage?

Getting a repayment mortgage really does make sense if you can afford it. Repayment mortgages are the only type of mortgage that guarantees you will own the property at the end of the loan term, as long as you have kept up with repayments. This is because you are paying back both the interest and the capital you borrowed. Although it might seem like you are spending more, you are actually paying for your property rather than just the interest. Repayment mortgages have some other advantages over endowment mortgages. Although your repayments are lower for endowment mortgages, you can never be sure how well your investment fund will perform. If it performs badly, you could lose your home because you are unable to make the final capital payment. With a repayment mortgage you don’t have to worry about stock market performance, and know that your repayments are helping you to pay off your debt each month.

Are there any disadvantages?

The major disadvantage of a repayment mortgage is that you have to pay more back each month than you would with an endowment or other interest only mortgage. The amount of money you need to pay back might be more than you can realistically afford each month, and so repayment mortgages might not be an option for you. Also, as the amount of interest decreases with each payment, your tax relief will also be reduced.

Are there alternatives?

If you want to get a repayment mortgage but feel that the repayments are too high at the moment, then you can get repayment mortgage that has a low start capital amount. This means that in the first few months or years you pay only interest, and then later on you pay an increasing amount of capital. This is good for first time buyers who know that their income will increase in time. However, because you are making lower payments now, the payments in the future will be even higher. If you can’t afford the monthly payments, then you should look at other types of mortgage. However, if you can afford to get a repayment mortgage, you should definitely do so. You will have peace of mind knowing that if you make all of your payments then you will pay off your debt and own your property outright.…