Capital Repayment Mortgages

Capital repayment mortgages are home loans where you repay capital, which is the amount you borrowed along with some interest each month. A repayment mortgage will usually be guaranteed to be repaid by the end of the mortgage term (around 25 years) as long as you meet all of your monthly payments. If you are purchasing a home to live in rather than buy to let, capital and interest mortgages are the most common mortgage type in the current market. .

Capital and interest repayments consist of monthly payments to repay your mortgage. In the initial years of your mortgage term, a larger proportion of the monthly payment will go towards interest and a smaller amount towards capital. Over time the balance switches, with more going towards paying off your mortgage and less on interest. So, although during the first few years of your mortgage repayments it may feel like you are not paying much off the debt, in time, the amount of capital coming off the debt will accelerate until the mortgage term ends. As you build up more equity you will also be able to access deals with lower interest rates which may allow you to pay off more of the loan by making overpayments too.

Capital & Interest Mortgages

There are several types of capital repayment mortgages including:

• Fixed-Rate Mortgages – The interest rate remains fixed for a set period
• Tracker Rate Mortgages – The interest rate tracks the base rate plus a set percentage
• Discount Mortgages – The Interest rate tracks the lender’s standard variable rate minus a set percentage
• Flexible & Offset mortgages – these can be either fixed, tracker, discounted or variable rates

You can find out further information on the different mortgages available on our mortgage types pages.

If you have any questions or would like to find out further information regarding capital repayment mortgages, contact us today to speak to one of us.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up the repayments on your mortgage.

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FAQs

What is a capital repayment mortgage?

It is a mortgage repayment method that means the mortgage debt reduces over the mortgage term. The debt reduces slowly to start with due to the fact that a higher proportion of the monthly payment will be interest, and less of it capital coming off the debt.

The debt will reduce faster in later years. This is because over time, with the debt reducing more and more, less of the monthly payment is interest and much more of it is capital coming off the debt.

How does a capital repayment mortgage work?

Your monthly mortgage repayments are calculated to include both the amount borrowed and the interest chargeable over the term. Payments are calculated so that by the end of the agreed mortgage term, you should have paid off the entirety of your mortgage and interest.

How to calculate a capital repayment mortgage

By far the easiest way to do this is by using one of the many online mortgage calculator tools. They are available on bank and building society websites, as well as specialist money-saving sites. It is something that a good mortgage adviser will cover with you though too, so the best thing to do is call us for an appointment and we can give projections of monthly costs given different scenarios (and after working out how much you can borrow from different lenders).