What Is a Mortgage with a Capital and Repayment?
"Mortgage payment (also called a capital-and interest loan)
Your monthly payments pay off the amount you owe and the interest on the loan over time. If you make all the payments you're supposed to, the loan will be paid off in full by the end of the mortgage term."
- Information for Consumers, FSA, June 2006
This type of mortgage goes by more than one name, which can be confusing. Repayment mortgage, capital mortgage, and capital loan are all the same thing. But that shouldn't throw you off! Capital mortgage and repayment mortgage are the same.
How Do I Know If I Should Get a Capital or Repayment Mortgage?
Repayment/Capital mortgage is a good choice for people who want to pay off their whole mortgage, including interest, by the end of their mortgage term. When the term of this type of mortgage is up, you're done and have paid off the loan in full. A lot of mortgage policies are based on how much interest you owe. Capital and repayment mortgages are common because they let homeowners pay off all of their debts.
When you work with a bank or company to figure out your mortgage policy and payments, they can give you a lot of choices. Ask what the interest rate and payment plan would be for a Capital or Repayment mortgage. You can use the numbers to help you decide what to do. At the end of the day, the best mortgage is the one you can pay for.
Do mortgages with a capital payment and a repayment plan cost more than other types?
"Most of what you pay off in the first few years is interest. As time goes on, you pay off more of the principal. It may seem like this mortgage is more expensive, but that's because, unlike other mortgages, you're paying off the principal as well as the interest."
- Repayment Mortgages, Mortgage Sorter web site, June 2006
Even though capital and repayment mortgages don't have to cost more than other types of mortgages, you might feel like you're making payments for a longer time with one. But this is not true. Capital and repayment mortgages only let you pay off your whole loan in one full cycle of payments. And once you're done, you're done. One of the most common types of mortgages used by homeowners is called a capital and repayment mortgage.
I'm still not sure what kind of mortgage I need. What do I need to do?
Getting a mortgage policy is an easy choice if you know you want to finance or re-finance your home or property. The only problem is figuring out what kind of mortgage is best for you. With so many choices and so much information about different types of mortgages, your head might start to spin. How do you decide what's best for you if you've never had a mortgage before and don't know much about them in general?
You have to do the math to find out what kind of mortgage is best for you. Have your bank, financial advisor, or the company you're re-financing with show you examples of payment plans for different types of mortgages, and be sure to ask all of your questions about each policy. You'll have a lot of questions, and some of them can only be answered by the people helping you set up your mortgage. You're the only one who really knows what your financial situation is like, so you'll know what's best for you when you see the plan in black and white.
