Repayment mortgages

In a repayment mortgage agreement, a consumer gives a lien to a lender as security for the repayment of a mortgage. In such an agreement, the consumer borrows money from a lender to buy a property on the assumption that the money will be repaid with interest to the lender within a specific period of time.

In most cases, the property that is bought with the mortgage is provided as collateral to the lender. This means that the piece of real estate that is purchased with the money is provided as security to a lender by the borrower. The lender can take possession of the property if the borrower fails to repay the loan in full. The borrower, called the mortgagor, pledges real property to the lender, the mortgagee, as security against the debt.

Mortgages are long term secured loans and usually repayment periods span through many years. In fixed rate mortgages, borrowers have to pay back a fixed amount each month, which will include a part of the original mortgage as well as interest. On the contrary, interest-only mortgages require borrowers to pay only interest each month. The capital can be repaid at the end of a specific tenure. This will help the borrower to use the money temporarily for some other uses. When a mortgage is repaid, during the early stages of repayment, majority of the repayment is utilised to repay the total interest. Therefore, the total amount that is due to the company starts to reduce only after a specific period of time. It is mostly the total interest that the borrower pays for the initial years of the mortgage.

Some repayment mortgage providers also offer facilities in which the borrower can repay more than what is required each month. This will allow borrowers to pay more and end the mortgage faster.

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