Repayment Mortgages: A mortgage where throughout the term, regular payments are made to partly repay interest on the capital and to partly repay the capital itself (the amount of the loan). Initially the largest proportion of the repayments will be used to pay interest since the capital amount outstanding is at its highest value. Therefore over the initial years the capital will not reduce very much. However as the years proceed more and more of the monthly repayments will be applied to reducing the capital until towards the end of the term the large proportion will be paying off capital and a small proportion paying interest.

 

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