Repayment mortgages
The most common, most simple and most risk-free mortgage repayment option. Part of each monthly payment goes towards servicing the interest on the loan and the remainder is used to reduce the outstanding debt. Your monthly payments remain the same each month unless the interest rate payable on your mortgage changes. In this case your repayments are recalculated so that the loan is still fully repaid at the end of the specified term.

Composition of mortgage repayments

As stated above if the rate payable on your mortgage remains the same then so will your monthly repayments. However, the ratio of the amount of the monthly repayment that goes towards paying interest on your debt against the amount used to reduce the debt varies with time. At the start of your mortgage term most of repayment goes towards paying the interest, but as the debt falls so does the amount of interest you owe each month. This continues until more of your repayment is used to repay the capital than goes on interest. In this manner your outstanding balance is reduced faster and faster over time.