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Repayment Mortgage

What are they - How they work - Pros & Cons

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A repayment mortgages is the simplest and most traditional style of mortgage -

  • Every month a single payment is made, part of which pays the interest with the remainder repaying the loan principal
  • So if the monthly payments are maintained the mortgage is guaranteed to be repaid in full when the term is up, for example over 20 or 25 years
In the early years of the mortgage a greater part of the payment is used to repay interest on the mortgage loan, while in later years an increasing percentage goes towards repaying capital.
How interest is charged
There are different interest rates, for example -
  • Fixed for a certain period of time, say 1 - 5 years
  • Variable, usually the lender's SVR which is usually the most expensive rate they charge
  • Discounted - look for these deals where the lender will offer say a 1% discount for a 1-2 years etc
  • More on Mortgage interest rates

  • Simple - the easiest style of mortgage to understand and operate. See Secret 3 - Buy simple and flexible - you can't read the future - which is one of this site's 10 Secrets to Good Personal Finance

  • Fully repay the loan - the initial loan is guaranteed to be paid off at the end of the term in 10, 20, 25 years etc

  • Plenty of deals available - these are popular mortgages so there's plenty of competition which means there are always many good deals around

  • Cheaper (in the long run) than interest only mortgages - yes, the monthly repayment figure is always going to be higher but the loan is actually cheaper over the long run


  • Higher monthly repayments - than many other mortgage styles including the ever popular interest only deals

  • Watch out for flexibility - even with a repayment mortgage you must make sure it's as flexible as possible, including the ability to make overpayments, underpayments and charges must also be reasonable. Some repayment mortgages will charge high fees for these services and they should be avoided

Buying tactics, tips and tricks
Discounted repayment mortgages

Want the right mortgage at the best price? Then start by downloading our free mortgage guide and follow the 4 easy steps.

A discounted mortgage is not an actual mortgage style like repayment or fixed etc. Rather it's a special offer mortgage that comes with a discount, perhaps 1% off the base rate for the first 12 months.

As repayment mortgages are a popular style of home loan the lenders are always offering discounts on some of their loans. So be on the lookout for them.

Look for flexibility

Pay special attention to how flexible the mortgage is.

For example, does it accept overpayments, underpayments and even payment holidays? Plus, how much are the early repayment charges. If they're expensive for the first few years that's not a problem but if they extend beyond that it's not good news. Why? Because you always want to be able to remortgage at a later date and expensive redemption fees might lock you into your present deal.

Use a mortgage broker

A mortgage broker can be an invaluable asset when choosing a home loan. But never rely on their advice without doing your own independent research.

Use this free guide - how to find the right mortgage at the best price for tips on dealing with the mortgage brokers.

LearnMoney.co.uk comment :
For the majority repayment mortgages are the best mortgages because -
  1. They're simple and in the world of personal finance the simplest products are normally always the best, and
  2. At the end of the term all the money has been repaid

The negative is that the monthly repayment can be large as the original loan is being repaid as the months tick by. This in contrast to an interest only mortgage where only the interest is paid.

FREE Report: How to get the right mortgage at the best price
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How to make sure you don't overpay on charges
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How to get a flexible deal - why this is so important
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