Direct Repayment Mortgage
- The means of re-paying a mortgage loan (see also interest only repayment)
- Say you buy a house for £100k.
- Say you borrow £75k
- You thus provide £25k deposit.
- 75% LTV = 75% of debt you owe to the lender and
- 25% of the deposit is the amount you provide to buy a property.
- In this instance you repay the mortgage by direct repayment.
- This means the mortgage loan decreases inversely proportional to any equity increase (amortization).
- This continues throughout the term until the mortgage is repaid to the lender and you own all the equity.
- This is in contrast to an interest only mortgage
- The loan remains the same and
- You repay using an alternative means e.g.
- You sell and downsize, and
- Rely on any inflationary property increase in value to repay the loan.
Published: 5 November 2013
Last Updated: 17 November 2021