Capital Repayment Mortgages

In this form the borrowers monthly payment is split into two parts. One part of the payment pays the interest required whilst the other part funds repayment of the actual mortgage loan. These mortgages are normally structured over a 25-year period, primarily due to average affordability in relation to monthly payments. After the 25yrs the mortgage is certain to be repaid ant the property will be owned outright. This is the primary reason for choosing to structure a mortgage this way.

In many cases lenders will allow overpayment of capital repayment mortgages this reducing the term and repaying the loan earlier. The benefit of doing this is two fold. Firstly the property is owned outright earlier and secondly as the loan is paid off earlier it naturally means that there will have been less interest paid I regard to the debt.

Some mortgage lenders will also allow you to redeem the overpayments made. Thus if the borrower was to over pay by £100 per month for a year he or she could then access the £1200 overpayment should they need to do.

 

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