A repayment mortgage takes care of the two main aspects of a UK mortgage - interest and capital - in tandem, which is why it's often referred to as a capital-and-interest mortgage.
Typically, when the borrower makes a monthly repayment to the lender, a part of the payment will go towards paying the interest; the rest goes towards reducing the capital.
The idea is that when the term of the repayment mortgage (20 years, 25 years etc.) comes to an end, all the capital will have been repaid.
Obviously, if interest rates change, the monthly repayment amount will also vary.
However, let's assume interest rates are fairly stable. At the beginning of the term, a greater proportion of each repayment goes towards paying interest as opposed to capital.
But, over time, this changes as more and more of the capital is repaid. The interest portion of the payment is reduced and the capital portion increases.
Providing changes in interest rate have been factored in, and all repayments have been made, the mortgage should be repaid at the end of the term.
Separate life assurance is required with a repayment mortgage. Otherwise, if the borrower (breadwinner) dies before the end of the term, the repayments will still have to be made or the outstanding loan repaid.
