The benefits of a UK capital repayment mortgage

A UK capital repayment mortgage is a mortgage where the loan amount borrowed is repaid 
over the term of the loan with part of each monthly payment going to repay the capital 
borrowed and the remainder paying interest.

For the first monthly repayment you make, your payment will be mostly interest, with a small amount to pay off some of the capital. For the very last monthly repayment you make, your payment will be mostly capital repayment, with a very small amount of interest. 

benefits

You know that your UK capital repayment mortgage will be fully repaid by the end of the term.

The repayment of the capital repayment mortgage will not be dependent upon you being able to find money to pay off the capital loan either from personal funds or via the performance of some form of stock market investment. 

A UK capital repayment mortgage is one of the most well known and understood, and is easy to set up.

The total cost of a capital repayment mortgage is often less than an interest only mortgage, because over the term of the loan the interest falls as the capital is paid off.

Providing there are no punitive redemption penalties on your UK capital repayment mortgage, if you come into a windfall income, you might be able to repay some of the loan amount borrowed, thus reducing the outstanding capital and monthly repayments. 

risks

If you move frequently (every five years or less) and maintain a constant 25 year mortgage, the loan amount borrowed may not be repaid until you retire. This is because in the early years, most of your monthly payment is made up of interest, so you don't have the opportunity to repay any appreciable amount of the capital borrowed.

There is no built in Life Insurance with this basic mortgage, so in the event of the borrower dying, their dependents (inheritors) would still have to pay off the debt. If you take out this kind of mortgage you may need to seek further financial advice, to cover this eventuality.

This type of mortgage is a 'no frills' mortgage and therefore you may not get the types of  'special deals' offered with other types of mortgages.

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