There are four main types of loans, these differ in the way the capital is repaid to the lenders.
Capital & Interest, the most popular type of housing loan, where the borrower makes regular repayments – part interest / part capital. These are usually for an agreed term, typically 25 years however in recent times the term can be as long 30 -35 years.
C&I loans are also know as Repayment mortgage, Standard mortgage and Annuity mortgage. In the early years of a C&I loan the majority of the repayment is used repaying the interest, so the capital reduces slowly.
So as the capital reduces with each repayment, so does the amount of interest payable on that capital.
The other types of loans are interest only repayments with the capital sum been paid at the end of the term from, a:An Endowment Mortgage b:A Pension Mortgage c:The sale of the property / asset.
This means that the borrower pays interest only for the term of the agreement and only repays the capital sum at the end by means of a …