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A repayment mortgage is a type of home loan where monthly payments are made which include a portion of the capital (the borrowed amount) and a portion of the interest. This means that at the end of the loan term, you will have repaid the full amount of your loan and the interest.
Repayment mortgages are the most common type of mortgage on the market and the usual mortgage term is around 25 years.
The loans are appropriate for the majority of borrowers but are most common for those looking to buy a home to live in rather than those looking to invest in a buy-to-let mortgage.
Monthly repayments for the first few years of your loan term will be more shifted towards repaying the interest but this breakdown changes with time and future payments will be more heavily shifted towards repaying the capital.
Lending Expert is a repayment mortgage broker and can compare over 1,000 mortgage deals across the UK. Whilst high street banks can offer repayment mortgages too, we can help find the best option for you with rates from 1.39% per month, whether you are looking for repayment, fixed, variable, tracker or have a bad credit history.
Start by clicking on ‘Check my Eligibility’ below and enter some basic details about you and your property – and Lending Expert will be able to help you find the best repayment mortgage according to your requirements.
- Monthly repayment plan
- Rates from 1.39% per month
- Borrow up to £2 million
- Loan Term – 1 to 25 years or upon request
- Minimum 25% deposit
- Interest-only, fixed, tracker mortgages available
- Rent charged should be 125% to 145% of mortgage repayments
- Free tool to compare repayment mortgages
What Is a Repayment Mortgage?
A repayment mortgage is a home loan with a monthly repayment plan over multiple years (usually 25 years). The monthly payments involve paying back both the capital (the overall amount borrowed) as well as the interest, according to the agreed rate between borrower and lender. Interest rates are determined by your loan balance and the loan provider,
They are typically made up of four key components: principal, interest, taxes and insurance The ‘principal’ refers to the overall loan amount and the interest is the cost incurred from borrowing the money.
The insurance costs are usually incurred if you make a lower deposit. For example, if you make a downpayment of less than 20%, you will have to take out private mortgage insurance which will subsequently increase your monthly payment. The taxes portion can come from any additional real estate or property taxes.
Types of Repayment Mortgage
There are different types of repayment mortgages. These include:
Fixed-Rate Mortgages: Fixed-rate mortgages mean that the interest rate remains fixed over a set period of time and that your monthly repayments are equal from month to month.
Discount Mortgages: Discount mortgages have an agreed discount rate between borrower and lender meaning that whatever the base rate decided by the borrower, the lender will receive the agreed discount rate.
Standard Variable Rate (SVR) Mortgages: SVR mortgages follow a monthly interest rate based on the lender’s standard variable rate.
Tracker Mortgages: Tracker mortgages are those for which the interest rate fluctuates in accordance with a benchmark base rate plus a set percentage meaning that monthly payments vary and money could potentially be saved in the long run.
Offset Mortgages: Offset mortgages use an interest rate based on how much you have borrowed minus any savings held in a linked account so that you can offset your monthly mortgage payments with money from your current account.
Guarantor Mortgages: Guarantor mortgages work with assisted payments from a guarantor (usually a parent or family member) resulting in a lower interest or bigger mortgage amount.
How Much Is a Typical Repayment Mortgage?
In the earlier years of your mortgage term, a bigger proportion of your monthly payments will be dedicated to paying off the interest, with a smaller proportion devoted to the capital. This balance changes over time and later payments will be predominantly focused on paying off the overall loan.
When the loan term finishes, the borrower will have paid off the full loan amount and any additional interest meaning that they will own the property outright.
Depending on the loan provider, you might be able to pay off more of the loan per month as you build up more equity, and could benefit from lower interest rates.
To work out exactly how much your repayment mortgage would cost, use our calculator or speak to one of our team at Lending Expert today.
What Areas of the UK Does Lending Expert Cover as a Repayment Mortgage Broker?
We proudly offer repayment mortgages across the entire UK, Scotland and Wales including Birmingham, Brighton, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, London, Manchester, Nottingham, Newcastle, Sheffield and more.
How Much Can I Borrow From a Repayment Mortgage?
Speak to an expert today in order to find out how much you can borrow from a repayment mortgage.
Can I Get a Repayment Mortgage?
- Aged 25 to 85 years’ old
- Minimum income of £25,000 per year
- Minimum deposit 25% of overall property value
- Good credit status
- Strong financial record (limited defaults, arrears)
What Other Factors May Impact Eligibility for a Repayment Mortgage?
Many different factors could impact your eligibility to secure a repayment mortgage.
These include, but are not limited to, the following:
- Credit score (this can affect the agreed interest rate)
- Debt-to-income ratio
- Home location
- Deposit amount
- Monthly income
- Home price and loan amount
- Work history
Is a Repayment Mortgage the Best Option for You?
Repayment mortgages are the most universally available mortgage and are favoured by the majority of those looking to buy a property to live in.
In general, you pay less overall with a repayment mortgage as the amount that you owe decreases each month. That means that towards the end of the loan term, more of each payment is focused on clearing the balance.
Additionally, later in the mortgage term borrowers may be able to benefit from lower interest rates as they are able to get better deals once they have a smaller outstanding balance.
Unlike interest-only mortgages, repayment mortgages are great for those looking to own their property outright at the end of the loan term without the need for any additional payments.
Those taking out a repayment mortgage will need to ensure that they are able to afford the monthly repayment plan (factoring in the combination of principal, interest, tax and insurance). For that reason, monthly payments may be higher than with other types of mortgages but borrowers benefit from stability and knowing that they have cleared their debt by the end of the loan term.
What Is the Difference Between Repayment and Interest-Only Mortgages?
The key differences between repayment mortgages and interest-only mortgages are the amount you have to pay back per month and the amount still owed at the end of the loan term.
With interest-only mortgages, you will pay back a lower amount per month. For example, if you borrow £200,000 over 25 years, at an interest rate of 3%, a repayment mortgage monthly payment would be £948. This is far higher than the monthly payment for an interest-only mortgage which would be £500.
However, if we look at how much is repaid at the end of the loan term using the same example, there is a big difference between the interest-only basis and the repayment mortgage.
For the interest-only mortgages, you will have to pay back the full amount of the principal loan at the end of the loan term. On the other hand, with the repayment mortgage, you have already paid back the full amount across the monthly payments and would own the property outright.
Repayment Mortgage Providers
Many lenders on the market offer competitive rates for repayment mortgages.
At Lending Expert, we compare the repayment mortgage market in order to find the best provider to suit your needs and the most suitable type of mortgage.
Rather than approaching the lenders directly and dealing with their in-house advisors, working with a mortgage broker will offer impartial advice to get you the best deal on the market.
How Do I Compare Repayment Mortgage Rates?
Working with a mortgage broker such as Lending Expert will help you find the best mortgage to suit your circumstances without impacting your credit rating.
Contact us today to speak to an expert and start comparing repayment mortgages to find the best option for you.
What To Consider Before Getting a Repayment Mortgage
Prospective buyers should always consider the following factors before deciding to take out a repayment mortgage:
- Annual income
- Credit score
- Amount you are able to put down as a deposit
- How much you want to borrow overall
- How much equity you have
- Whether you are looking to buy with someone else
- Job stability
- Purpose of the mortgage (e.g. first-time buyers, investment property)
What Happens if I Do Not Keep Up With Repayments?
Your repayment mortgage is secured against the property meaning that any late repayments will lead to a damaged credit score, late penalties and maybe even risk of property repossession from the lender.
Why Use Lending Expert As Your Repayment Mortgage Broker?
Working with a number of high street banks and specialist mortgage lenders, Lending Expert has access to over 1,000 mortgage deals available and is in the perfect position to help you get approved and get the best rates.
Our eligibility checker is completely free to use and can provide an indicative quote, with no obligation.
Founded in 2013, we have years of experience working in the secured loan and mortgage market and have helped thousands of customers to date. Our values have always been to find the right product for the right individual at the competitive rate – and we are pleased to offer our services for you today!