Mortgage Repayments
Learn more about the different ways to repay your mortgage and the differences between them. Find out which option is right for you.
NatWest mortgages are available for over 18s
Your home may be repossessed if you do
not keep up repayments on your mortgage
Mortgage repayment types
There are three different ways you can pay off your mortgage: repayment, interest-only, or a mix of the two. We've outlined what these are, how they work, and the main differences between them.
Repayment (capital and interest)
A repayment mortgage is when you pay a set amount each month and these payments go towards paying off the amount you’ve borrowed (capital), and the interest charged on your loan.
This means that your outstanding borrowed amount will reduce as you pay it off, and as your balance reduces, so will the amount of interest you pay each month.
Providing you keep up with your monthly payments, your entire borrowed amount will be paid off by the end of your mortgage term. The repayment option is the most popular mortgage type, and is available across most of our mortgages.
Interest-only
Repayments on an interest-only mortgage, as the name suggests, only cover the interest on your loan. At the end of your mortgage term you’ll still have to pay off the sum you borrowed, and this will be the same amount as when you took out your mortgage.
In order to pay off your loan, you’ll have to make sure you have a plan in place once your mortgage term is up. It’ll always be your responsibility to pay off the balance in full.
Payment at the end of your mortgage term is usually done through an investment such as an endowment, ISA or a pension.
Please note there is an interest-only cap on mortgages at 75% LTV. A loan to value (LTV) ratio is a comparison between the value of your home and the value of your loan. You will only be able to take out an interest-only repayment plan on borrowing below 75% LTV.
A mix of repayment and interest-only
This is when you combine the two and your payments go towards paying off the interest charged and some of the loan you’ve borrowed. You don’t pay off as much as you would with a repayment mortgage, so at the end of your mortgage term you’ll still have some of your mortgage left to pay off. Therefore, a repayment plan will be required to pay the outstanding amount.
The interest-only cap at 75% LTV also applies to combined mortgages.
| Repayment | Interest-only | Repayment & Interest-only | |
|---|---|---|---|
What do my payments cover each month? |
A proportion of your loan and the interest charged |
The interest charged on your loan |
Some of your loan and the interest charged |
Will the amount I owe reduce each month? |
Yes – as you begin to pay back your mortgage |
No – your payments don’t cover the amount you borrow |
Yes, but not as much as a repayment-only mortgage |
What will I have to pay at the end of my mortgage term? |
Nothing if you keep up with your payments |
The full amount you’ve borrowed |
Some, but not all of your initial borrowed amount |
Make an overpayment
You can make an overpayment on your mortgage by paying off a little extra each month, or by making a lump sum payment. This can help you pay off your mortgage faster.
You should check if there are any minimum or early repayment charges for making an overpayment, which will be outlined on your mortgage offer document.
Use our overpayment calculator to help you see how much you could save.
