When you borrow money to buy a house, you typically take out a mortgage. There are various kinds, but a repayment mortgage is the most common.
This is when you pay back the total amount of capital borrowed alongside any interest over the full term of the loan. This means that once the mortgage is paid in full, you own the property outright. Repayment mortgage can also be known as capital repayment mortgage.
A repayment mortgage means paying back the money you borrow (the capital) plus interest over an agreed term, usually around 25 years.
Your interest rate can be fixed, where monthly payments stay the same for a set period, or variable, where the rate changes with an external benchmark like the Bank of England base rate. Your monthly repayments are calculated so you gradually repay both capital and interest, clearing the full balance by the end of the term.
With a fixed-rate mortgage, your interest rate and monthly payments stay the same for a set period (usually 2, 3, 5 or 10 years).
This offers protection from rising rates and makes budgeting easier. However, fixed rates are often higher than variable options, you won’t benefit if rates fall, and early repayment charges may apply if you want to overpay or leave the deal early.
With a variable-rate mortgage, your interest rate and monthly payments can change.
These deals often track an indicator like the Bank of England base rate, so payments fall when the rate drops and rise when it increases.
They usually start cheaper than fixed-rate mortgages and can offer good value when rates fall. But they provide less certainty, and your payments could rise quickly, so you need to be confident you can afford potential increases.
With a fixed-rate mortgage, your interest rate and monthly payments stay the same for a set period (usually 2, 3, 5 or 10 years).
This offers protection from rising rates and makes budgeting easier. However, fixed rates are often higher than variable options, you won’t benefit if rates fall, and early repayment charges may apply if you want to overpay or leave the deal early.
With a variable-rate mortgage, your interest rate and monthly payments can change.
These deals often track an indicator like the Bank of England base rate, so payments fall when the rate drops and rise when it increases.
They usually start cheaper than fixed-rate mortgages and can offer good value when rates fall. But they provide less certainty, and your payments could rise quickly, so you need to be confident you can afford potential increases.
Unlike a repayment mortgage, with interest-only mortgages your monthly repayments only go towards paying off the interest on your mortgage. This means they don’t clear the balance of the money you borrowed (the remaining capital).
Instead, you have to repay this sum at the end of your term. You can do this by using a repayment vehicle such as a savings plan (like an ISA or investment fund). Or by using a lump sum (perhaps gifted as an inheritance).
Interest-only mortgages tend to be less common these days, except for specific products like buy-to-let mortgages.
Yes, you can switch to a repayment mortgage. Most lenders allow you to move from interest-only to repayment, either by remortgaging to a new deal or requesting a product switch with your current lender.
You’ll need to pass affordability checks, as your monthly payments will usually increase.
Switching can be a good way to start paying down your balance and reduce the amount of interest you pay over the long term.
Yes. Our expert mortgage brokers, Mojo, can give you free advice and help scour the market to find a repayment mortgage that is suitable for your needs and individual financial circumstances.
Yes, most providers offer joint repayment mortgages. The process is the same as when you apply on your own. You need a deposit and to show that you can afford the monthly repayments and costs. Both applicants will have their credit records checked.
Use the links below to find out about other mortgages
