REPAYMENT MORTGAGES ADVANTAGE TO BORROWERS

2007-03-08 10:33:40

( Financial )



Repayment mortgages comprise monthly payment of principal amount of loan and interest. The mortgage is fully paid at the end of the term given that you meticulously make monthly payments on time. The advantages of repayment mortgages to borrowers are described below.

Repayment mortgages pays off the amount of mortgage at the specified term agreed with the lender as long as borrowers make on time payments. The fixed amount of monthly repayments evenly reduces the loan balance comprising both the principal and interest.

Borrowers will only pay back less amount of the mortgage when they remortgage their homes. Unlike an interest only loan where you will still be paying the same amount of repayments since borrowers have not covered repayment of the loan capital.

Lenders can arrange to shift repayments into interest only for certain period in cases where borrowers encounter difficulties in paying the mortgage within the loan term. It will still reduce the amount of repayments since you already made substantial amount of principal and interest repayments prior to shifting into interest only payments.

Borrowers are cushioned against paying more money when interest rates increases since the balance of the loan decreases over time when you pay through repayment mortgages. On the other hand, interest only loan entails borrowers to pay more money when interest increases since the loan principal still remains the same for certain period until interest payments are fully covered.

Borrowers’ equity on their homes increases over time that improves their prospects of getting higher amount of loan when they decide to remortgage or shift to equity mortgage.

Repayment mortgages are suitable mortgage for borrowers who are confident that they can make equal amount of interest and loan principal morgage repayment at the end of the term.

Repayment mortgages provide more advantages to borrowers in the long run. It helps pay off the mortgage faster. Borrowers are secured of equity on their homes as time passes. Thus, choose repayment mortgages if you believed that you have the capacity to pay off both the principal and interest payments of your mortgage.


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