1. Capital & Repayment mortgage
This is the most common form of mortgage, and until two years ago was the only mortgage product available from the big four banks.
The mortgage is paid off over the lifetime of the mortgage. The repayments are made up of interest and capital repayments reducing the size of the mortgage Capital & repayment mortgages can be over 5 to 30 years.
As there are no differentiators in this product the interest rate on it is the most important factor.
There are other products that can be added onto this such as a flexi facility or access bond.
Tips for the client
At the beginning of the 20-year mortgage, the majority of the clients monthly repayment will be made up by interest payments with only a small proportion of the repayment reducing the capital amount. If the client overpays into their mortgage account every month it will dramatically reduce the duration of their bond, and save themselves a considerable amount of interest over the lifetime of their bond.
Clients can also extend their mortgage to 30 years. As their monthly payments will now be less this will assist them in borrowing a larger amount. The clients must be made aware that because they are lengthening the repayment period they will be paying more interest in over the lifetime of their bond.
Read about an interest only mortgage