What is Mortgage Repayment ?

Mortgage Repayment in UK is undoubtedly the most important as well as a crucial part of the overall Mortgage process. The terms upon which both the parties, i.e., the lender as well as the borrower agree, the mortgage is finalized accordingly. When the Mortgage borrower takes the mortgage from the mortgage provider (lender), then the mortgage is needed to be returned according to the terms agreed. This process of returning the mortgage is known as Mortgage Repayment.

Meaning of Mortgage Repayment

Mortgage Repayment can be defined as paying off the mortgage which was borrowed from the Mortgage Lender. The borrower has to pay back the lender both capital as well as the interest of the mortgage. In general cases, the capital of the principal amount of the mortgage is paid back to the lender in pieces along with some percentage of interest every month. In some other cases, like interest-only repayments, the borrower pays back only the interest every month, and the principal amount is paid back once the term of the repayment gets over.

Types of Mortgages

There are two types of Mortgages that offer two different ways to repay the loan. These two are explained below in a detailed manner:

Capital plus Interest Mortgage: In this type, the borrower repays the mortgage in pieces every month along with some amount of interest that has already been decided between the lender and the borrower. The term of the repayment is also decided in which the entire amount (principal + interest) is settled over the years of the loan term.
Interest-only Mortgage: The borrower of the mortgage pays only the interest over the years of the loan term and not the parts of the principal amount. When the term of the mortgage gets over, the borrower will have to pay the overall principal amount to the lender.