The amount of capital you repay each year will depend on how the interest is calculated. This can range from between daily and annual calculations.If your interest is calculated on a daily basis, you will be repaying less interest over the mortgage term so it is best to go for this type of mortgage.
Repayment mortgages allow flexibility when considering the amount of capital you repay as you can structure only part of your total mortgage to be on capital and interest and the balance of interest only. This will lower your monthly payments to make it more affordable. You’re also able to change the split over the mortgage term if your income increases.
Lenders will base their decision to lend or not on the client’s ability to pass their affordability criteria. Usually clients will prefer to go for the longest mortgage term that is available.
Longer term mortgages: costs less per month as the repayments are spread over a longer term. However, the longer your mortgage term, the more you will pay overall as you will be charged more interest.
Short term mortgages: The shorter your mortgage term, the higher the cost each month, however this will allow you to pay off the balance quicker. You will own your home much sooner and end up paying less in total due to less interest.