Is a Repayment Mortgage Right for You?

With a repayment mortgage, your monthly payments go towards reducing the amount you owe as well as repaying the interest your lender charges. This means each month you are repaying a small part of your mortgage. In contrast, with an interest only mortgage your monthly payments only pay the interest charged on your loan, so you are not actually repaying the loan itself.

• You see your progression. Provided you make your repayments, you can see your mortgage getting smaller.
  
• You have the certainty that your mortgage will be repaid at the end of the term.
• It is a safe option. You do not have to rely on alternate options of repaying your mortgage such as savings accounts and investments.

• Initially the majority of your payments go towards the interest charged on your loan, resulting in very little repayment of the loan itself in the early years.

With repayment mortgages you repay a combination of interest and capital on the loan whereas with an interest only mortgage, you only repay the interest. The monthly payment on the interest only mortgage is lower (as it's only the interest) however, the total borrowing will still be owed at the full term, so you need an alternate plan in place to make this payment when the time comes such as a savings plan, other investments or downsizing. Please keep in mind however, these alternate plans do not always guarantee a return which is sufficient to clear your mortgage.