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 and 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.
Frequently Asked Questions
-
What is a capital repayment mortgage?
A capital repayment mortgage is a type of home loan where your monthly payments cover both the interest and part of the original amount borrowed. By the end of the term, provided you make all payments, you will have fully repaid your mortgage and own your property outright.
-
How do monthly payments work on a capital repayment mortgage?
Each month you pay back the interest charged plus a portion of the loan itself. At the beginning of the term, more of your payment goes toward interest, but over time a larger share reduces the capital owed.
-
What are the advantages of a capital repayment mortgage?
The main advantage of a capital repayment mortgage is certainty. If you keep up with payments, you know the mortgage will be completely repaid at the end of the term. You also build equity in your property from day one.
-
Are monthly payments higher than with other mortgage types?
Yes, monthly payments on a capital repayment mortgage are usually higher than an interest-only mortgage because you are paying off both the capital and the interest. However, this also means you are reducing your debt each month and avoiding a large lump sum repayment at the end.
-
Can I make overpayments on a capital repayment mortgage?
Many lenders allow you to make overpayments, although some place limits on how much extra you can pay each year without a charge. Making overpayments can reduce the term of your mortgage and lower the total interest you pay.
-
What happens if I miss a payment?
Missing a payment can put you into arrears and may affect your credit rating. If payments are missed regularly, your lender could begin repossession proceedings. It’s always best to contact your lender or mortgage advisor as soon as you anticipate difficulties making payments.
-
How long is a typical capital repayment mortgage term?
Most capital repayment mortgages run for around 25 years, but terms can be shorter or longer depending on your circumstances. A longer term means lower monthly payments, but you will pay more interest overall.
-
Is a capital repayment mortgage right for me?
A capital repayment mortgage is often a good choice for borrowers who want the security of knowing their loan will be fully repaid at the end of the term. It is especially suitable if you prefer predictable progress towards owning your home outright without needing a separate repayment plan.
Our Testimonials
“Stuart and Sharon have arranged a buy-to-let mortgage, a mortgage for our first home together, a re-mortgage and have now helped us port over our mortgage to a new house. The service they have provided has been consistently amazing, especially as our purchases have never been straight forward. I would recommend them to anyone.” Dominic, Surrey
“Stuart was recommended to me by a friend and I would certainly continue that recommendation. He is very thorough and ensures you know all the options. Stuart makes the process clear and you feel
informed the whole way. Thanks Stuart” Danielle C, Hemel Hempstead
“Stuart is an expert in his field, giving great objective advice after careful and deliberate diagnosis of what we were after. I can confirm he is also a very patient man. Highly recommended!” Alex C, Leighton Buzzard
“Remortgage quickly sorted out today via phone/email. All options explained and discussed and I’m very happy with the outcome. Thoroughly recommend.” Craig B, Sunny Scotland
Book An Appointment If you would like to arrange a telephone call or meeting, please fill in your details below and we will respond as soon as possible.
Monthly Budget Planner
Monthly Budget Planner