ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

The Difference Between An Interest Only Mortgage And A Repayment Mortgage

Updated on July 11, 2010

Once you have made the decision to buy a house you have to start doing some work and look into how you can afford to make this purchase. If you are not from a wealthy family who will lavish you with a never-ending stream of cash, you will have to do what the majority of people end up doing. You are going to have to sign up your first mortgage deal.

During this time you will need to learn a lot of new jargon like the types of repayment plans available as well as the different types of mortgages there are such as fixed rate and variable rate.

First things first. When you borrow money from a financial institution you always have to pay interest on the total amount. This is what happens with credit cards, store cards and when you apply for student loans. The same thing applies when you get a mortgage except that you are borrowing a much larger sum so the total interest will also be on a much larger scale.

With a mortgage deal there are 2 types of basic repayment plans that you can choose to apply for.

  • An interest only home mortgage
  • A repayment mortgage

Is an interest only or a repayment mortgage the best choice for you?
Is an interest only or a repayment mortgage the best choice for you?

An Interest Only Home Mortgage

An interest only home mortgage means that the bank calculates how much your total loan will cost you in interest according to the rate that has been set. This figure is then divided by the length of the mortgage contract. A mortgage term can be whatever you want it to be but the normal length is 25 years. You then pay this on a monthly basis until you come to the end of the agreed mortgage period.

As you have only paid the interest, you still have the actual capital to pay back to the bank. Most mortgage companies will expect you to set up a separate savings plan in order to ensure that by the end of the 25 years you have accumulated enough to pay off the complete mortgage.

It used to be the financial institutions’ responsibility to ensure that individuals set up a separate payment scheme but they no longer have to do this. They are only obliged to inform you that this is recommended. If you choose not to take some sort of provision, you could risk losing your home and the investment you have made in it.

A Repayment Mortgage

A repayment mortgage, which is also known as a capital & repayment mortgage calculates both the total mortgage with the interest that is accrued over the lifetime of your chosen deal. This figure is then divided equally over the period and you end up paying a little bit of the interest as well as the capital each month.

In the beginning you are paying mostly interest but there comes a time when the amount of interest diminishes and you are repaying more of the capital. By the end of the term you will have completely paid off everything.

The repayment mortgage is a great choice because you will know that by the end of your contract, you will have nothing left to pay and your home is completely yours. This does of course work out to cost more on a monthly basis.

In order to choose the right type of mortgage to suit you make a start on some online research to ensure you have taken on board all the relevant information to make the right choice.


Submit a Comment

No comments yet.


This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

Show Details
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)