There are three types of mortgages available as ways to repay the money that you have borrowed to secure your home. One is Interest only, where you only pay the interest accrued on the original amount you borrowed, and the complicated offset mortgage sees you use a separate savings account or accounts for overpaying some months and missing others. However, as you’ll see from Conveyancing news like that from Sam Conveyancing, these have both created issues for the mortgage market. Therefore the most common mortgage now is that of the Repayment mortgage.
A repayment mortgage is the only way you can guarantee that the debt on the home will be completely paid off at the end of the mortgage term. Both the other options of offset and Interest only cannot do this which is why it is challenging to get this type of mortgage without having perfect plans to back the money at the end of the term of the mortgage.
The repayment mortgage pays a portion of the interest generated by the loan amount, but it also crucially reduces the mortgage amount as well. It can be a larger monthly payment, but the peace of mind is that the debt is being reduced is reassuring. It also means that the interest rate will drop over the years as long as the value of the home is greater than the amount you have borrowed. The monthly amount will also drop. It is a secure way to repay the mortgage, and responsible lenders favour it.
