Interest-Only and Repayment Mortgage Explained

If you’re looking to taking out a mortgage loan, you may be offered two options; interest-only or repayment mortgage.

11:30 29 July 2013

If you’re taking out mortgage loan, you will be presented with several options. Some of them are interest-only and repayment mortgage. Both have pros and cons that you need to know before you make any decision. 

 

Interest-only mortgage, as the name suggest, is the type where you only pay for the interest every month. This means that your monthly payments are considerably lower, however you don’t actually pay any of the capital or the money you borrowed. At the end of the loan term, you will still owe the same amount of money that you need to pay right away. 

 

Repayment mortgage, on the other hand, is the most popular type of mortgage for a lot of homebuyers. It’s also known as capital and interest mortgage. With this, you pay off the amount you borrowed together with interest by making monthly payments. Compared to interest-only mortgage, your monthly repayments are considerably higher. However, at the end of the term, you’ll be the owner of the house.