Repayment mortgages

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What's a repayment mortgage?

A repayment mortgage (sometimes called a capital and interest mortgage) is where your monthly payment covers two things: part of the amount you originally borrowed (the capital) and the interest your lender charges on top.

With every payment you make, the amount you owe gets a little smaller. Keep up your payments for the full term and the mortgage is completely paid off. You own the property outright.

This is different from an interest-only mortgage, where your monthly payments only cover the interest. With interest-only, you still owe the full amount at the end and need a plan to pay it back in one go.

Repayment mortgages are by far the most popular choice for homebuyers in the UK. If you’re buying a home to live in, this is almost certainly the type of mortgage you’ll be offered.

How does a repayment mortgage work?

Your lender works out a monthly payment amount that, if you pay it every month for the full mortgage term, will clear the whole debt, capital and interest.

Here’s the part that catches some people off guard: in the early years, most of your monthly payment goes towards interest, not the capital. As time goes on, the balance tips. You’ll be paying less in interest and more towards actually owning your home.

This happens because interest is calculated on the outstanding balance. When you owe more, you pay more interest. As the balance drops, so does the interest charge, and more of your payment chips away at the capital.

How your monthly payment splits over time

Based on a 25-year repayment mortgage. Each row shows the same monthly payment, but the split between interest and capital changes.

Interest changes over years

This is why your annual mortgage statement might feel a bit deflating in the first few years. It can look like the amount you owe hasn’t budged much. Don’t worry. It’s working as it should. The pace picks up as you go.

Work out your monthly repayments

Knowing the theory is useful, but seeing actual numbers makes it real. Use our mortgage repayment calculator to get an estimate based on the amount you want to borrow, your interest rate and your preferred term.

You can try different scenarios to see how changing the deposit size, term length or interest rate affects what you’d pay each month.

Mortgage repayment calculator

Pop in a few numbers and see what your monthly payments could look like. It only takes a minute.

Try our repayment calculator

Types of repayment mortgage

“Repayment mortgage” describes how you pay back the loan (capital plus interest, each month). But you still need to choose what kind of interest rate you want on top of that. Here are the main options.

Type	How the rate works	Good to know
Fixed rate	Your interest rate stays the same for a set period, usually 2, 3 or 5 years	Your monthly payments stay predictable. You’re protected if rates go up, but you won’t benefit if they drop
Tracker	Follows the Bank of England base rate plus a set percentage	Your payments go up or down with the base rate. Good when rates are falling, riskier when they’re rising
Discount	A set discount off your lender’s standard variable rate (SVR) for a fixed period	Cheaper at first, but your lender can change their SVR at any time
SVR	Your lender’s default rate, which they set themselves	Usually what you move onto after a fixed or tracker deal ends. Often higher than other options
Offset	Links your mortgage to your savings. You only pay interest on the difference	Useful if you have decent savings. You don’t earn interest on those savings, but you pay less mortgage interest

Pros and cons of a repayment mortgage

What's good about it

✔ You're guaranteed to own your own home outright at the end of the term, provided you keep up with repayments.

✔ Your debt gets smaller every month, which means your equity grows.

✔ As the balance falls, so does the amount of interest you're paying.

✔ Lower risk than interest-only because you don't need a separate plan to repay the capital.

✔ Most lenders offer repayment mortgages, so you've got plenty of choice.

✔ A lower outstanding balance can help you get better deals when you remortgage.

What to think about

✘ Monthly payments are higher than interest-only because you’re paying off the capital too.

✘ In the early years, it can feel slow because most of your payments goes to interest.

✘ If you’re stretched on affordability, the higher payments could be tight.

✘ You’re locked in for a long time, typically 25 years or more.

✘ Early repayment charges might apply if you want to switch deals or pay off a lump sum.

✘ If interest rates rise and you’re on a variable rate, payments will go up.

Repayment vs interest-only: what’s the difference?

This is one of the most important decisions you’ll make when choosing a mortgage. Here’s how the two stack up side by side.

	Repayment mortgage	Interest-only mortgage
Monthly payments	Higher, because you’re paying capital and interest	Lower, because you’re only covering interest
What happens at the end?	Mortgage fully paid off. The home is yours	You still owe the full amount you borrowed
Total cost over the term	Less total interest paid because the balance shrinks	More total interest paid because the balance stays the same
Risk level	Lower. As long as you make payments, the debt clears	Higher. You need a solid plan to repay the capital
Who's it for?	Most homebuyers, especially first-time buyers	Typically buy-to-let investors or people with a clear repayment strategy
With an interest-only mortgage, your monthly payments are cheaper, but you still owe the entire loan at the end. If you don’t have a solid plan to repay it, you could be at risk of losing your home. That’s why repayment mortgages are the safer and more popular choice for most people.

Frequently asked questions

Can I switch from interest-only to a repayment mortgage?

Yes. Many lenders will let you switch from interest-only to repayment. Your monthly payments will go up because you’ll start paying off the capital as well as the interest. It’s worth speaking to your lender or a mortgage adviser to understand how the change would affect your payments.

What happens if I miss a repayment?

Missing a mortgage payment is serious. Your lender will usually contact you to discuss it. If you’re struggling, reach out to them as early as you can. They may be able to offer temporary solutions like a payment holiday or reduced payments. Consistent missed payments can lead to your home being repossessed, so getting help early really matters. Is also worth remembering that missed payments will likely have an impact your credit file, which may make getting a future mortgage more difficult or increase the rate at which lenders will lend to you.

Can I overpay on a repayment mortgage?

Most lenders allow overpayments of up to 10% of your outstanding balance each year without charging a penalty. Overpaying can reduce the total interest you pay and shorten your mortgage term. Check your specific deal for any early repayment charges before making extra payments.

How long is a typical repayment mortgage term?

25 years used to be the standard, and it’s still the most common. But terms of 30, 35 and even 40 years are now available. A longer term means lower monthly payments, but you’ll pay more interest overall. Some lenders also offer shorter terms of 15 or 20 years if you can afford the higher monthly payments.

What’s the difference between a repayment mortgage and a capital and interest mortgage?

Nothing. They’re the same thing. “Repayment mortgage” and “capital and interest mortgage” both describe a mortgage where your monthly payments cover part of the capital (the amount borrowed) and the interest. Different lenders and advisers use different names, but the product is identical.

Can I get a repayment mortgage as a first-time buyer?

Absolutely. Repayment mortgages are the most common choice for first-time buyers. You’ll need to meet your lender’s affordability criteria, which includes your income, outgoings and credit history. Many lenders offer specific deals for first-time buyers, sometimes with lower deposit requirements or fee-free arrangements.

Do I build equity with a repayment mortgage?

Yes. Every payment you make reduces what you owe, which means your equity (the portion of the property you actually own) grows over time. If the value of your property also goes up, your equity increases even faster. This is one of the main advantages of a repayment mortgage over interest-only.

What happens at the end of a repayment mortgage term?

If you’ve made all your payments on time, the mortgage is fully paid off. You own the property outright, and your lender will release the charge on your property. You won’t have any more monthly mortgage payments to make.

Things you might not have thought about

These are the questions that often come up a few months into a mortgage, not before you take one out. Worth reading now so you’re prepared.

What if I want to move house before the mortgage term ends?

You can. It’s called “porting” your mortgage. Many deals let you transfer your existing mortgage to a new property. If you can’t port, you’ll repay the current mortgage when you sell and take out a new one on the next property. Watch out for early repayment charges on your current deal though. These can be anything from 1% to 5% of the remaining balance.

Why does it feel like my balance barely moves in the first few years?

Because most of your early payments go towards interest, not capital. This is completely normal. It’s how amortisation works. The balance starts to drop noticeably after a few years, and the pace gets quicker as time goes on.

Could I end up in negative equity with a repayment mortgage?

It’s less likely than with interest-only, but yes, it’s possible. If property values fall sharply, especially in the early years when you haven’t paid off much capital, the property could be worth less than what you owe. The good news is that as long as you keep making payments, this usually sorts itself out over time as property values tend to recover and your balance drops.

What happens to my mortgage if interest rates go up?

It depends on your deal. If you’re on a fixed rate, nothing changes until that fixed period ends. If you’re on a tracker or variable rate, your payments will go up when interest rates rise. This is why some people prefer the certainty of a fixed rate, even if it’s slightly more expensive to begin with.

Should I pay off my mortgage early if I get a windfall?

It can be a smart move, but check for early repayment charges first. Also think about whether that money might work harder for you elsewhere, for example in a pension or paying off higher-interest debts like credit cards. A financial adviser can help you weigh up the options.

What if I can’t afford the repayments any more?

Talk to your lender as soon as possible. They’re required to treat you fairly and may offer options like extending your mortgage term (which lowers monthly payments), switching to interest-only temporarily, or taking a payment holiday. Ignoring the problem makes it worse. Getting help early gives you the most options.

Find a mortgage for your new home

Nottingham Building Society is working with Mortgage Advice Bureau to get the right mortgage for your new home. Their advisers have access to over 12,000 mortgages from over 90 trusted lenders to find the right fit.

Just answer a few quick questions about the property and how much you want to borrow. Then, they’ll call you to chat about your options. Let’s turn that homeownership dream into a reality.

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