process of charging interest on a repayment mortgage

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How interest is charged on the repayment mortgage?

Samantha · Posted: Sat Nov 05, 2005 4:07 pm Post subject:

Hi Mathew,

Generally interest is charged on the outstanding balance of the loan amount and is fixed at beginning of the year.

Once the interest is fixed for a year, it does not get reduced even if some extra repayments are made after this date.

For some more information on repayment mortgage refer here.

God bless you.
Samantha

Guest 0.10 Dollars($)

Please explain the difference between repayment mortgage and endowment mortgage.

Thanks

Guest 0.10 Dollars($)

Hi Susan,

The basic difference between a repayment mortgage and endowment mortgage is that in case of repayment mortgage, the principal along with the interest is paid back monthly over the life time of the mortgage. So, at the end of the term, the mortgage gets fully paid off.

In endowment mortgage, the endowment policy may not grow enough to meet the required target and at the end of the term there is no guarantee that the loan amount will get fully paid at the end of the term.

Regards

Samantha · Posted: Sat Nov 05, 2005 5:20 pm Post subject:

Hi Susan,

Welcome to MortgageFit Forums.

Fina_in has pointed out the basic difference correctly and I would like to add some more.

The differences may listed as below -

With repayment mortgage the mode of monthly mortgage repayment remains the same in every month i.e. the interest(which varies with outstanding balance) and a part of the principal whereas in endowment mortgage the loan amount is not repaid as you go along.
There is unpredictability regarding the rates in endowment mortgage which is not the same in case of repayment mortgage.
Endowment policies includes life insurance which is not required in repayment mortgage.

Hope this information will help.

God bless you.
Samantha

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