Glossary · UK
What is Capital Repayment Mortgage?
The standard type of mortgage where each monthly payment covers both interest and a portion of the capital borrowed, so the loan is guaranteed to be fully repaid by the end of the agreed term.
Full Definition
A capital repayment mortgage -- often simply called a repayment mortgage -- is the most common type of mortgage in the UK, structured so that each monthly payment covers both the interest charged on the outstanding balance and a portion of the capital originally borrowed, with payments typically calculated so that the loan is fully repaid by the end of the agreed mortgage term (commonly 25 to 35 years, though shorter and longer terms are both available). In the early years of the mortgage, a larger proportion of each payment goes towards interest and a smaller proportion towards capital, gradually shifting so that later payments repay proportionately more capital, because interest is charged on the remaining balance which steadily falls over the term. The key advantage over an interest-only mortgage is certainty: provided all payments are made as scheduled, the mortgage is guaranteed to be paid off in full by the end of the term without the borrower needing a separate investment, savings plan, or sale of the property to clear the capital, which is why lenders now require most residential borrowers to use a repayment basis, reserving interest-only lending mainly for buy-to-let, high-net-worth, or later-life mortgage products with a clear, verified repayment strategy.