Repayment Mortgage (Annuity)

This is the most common form of mortgage: known as an annuity, a repayment mortgage involves taking the loan over a fixed term, and repaying the capital in equal monthly amounts over that period, plus the interest due on the capital remaining at the prevailing mortgage interest rate.

With this type of mortgage, you will be paying mostly interest to start with, but that will reduce as the capital reduces, and there will come a time when the majority of the repayment is capital. You can get two types of repayment or annuity mortgages: fixed rate and variable rate. There is a third, known as an offset mortgage that is a combination of the two. With this you can make lump sum payments to pay the mortgage off sooner.