Repayment Mortgage

Sam · Posted: Sat May 29, 2004 4:47 am Post subject: Repayment Mortgage

Repayment mortgage is the most common type of mortgage, where principal and interest is paid monthly, until the loan is repaid. It is also known as 'annuity repayment method' and 'capital and interest mortgage'. In this type of mortgage the mortgage debt is divided into the following:

Principal repayments- repayment of money borrowed.
Interest repayments- repayment of the interest charged for a loan.

Advantages of Repayment Mortgage are as following:

There is a guaranteed repayment of loan at the end of period.
More and more capital is repaid as the period advances.
There is a gradual reduction in the overall mortgage debt.

Disadvantages of Repayment Mortgage are as following:

There is no surplus cash at the end of the term.
Separate life assurance is required to cover the loan.
The term of the loan may be changed at the choice of the lender.

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