The way you repay the loan;
Repayment is the term used to explain the way you will pay back the mortgage loan. A repayment, also known as Capital and Interest means that with each month’s payment you will pay back a little bit of the loan amount and also the interest that is owed on that part of the loan. So, each month you will see the loan amount reduce.
You will also hear the term Interest only; with this type of repayment you will only pay the interest element each month and none of the loan amount you borrowed. Therefore, the loan amount will remain the same for the length of the mortgage. Interest only historically was a way of keeping mortgager repayments low when you were starting out and buying your first home, however it does have a tenancy to leave people in trouble because you still always owe the original loan amount, and you need to have a way of eventually pay this back to the lender. Interest only can work for some people however lenders are general wary of anyone asking for an interest only mortgage on their first home and have some additional questions and conditions that you need to meet.
