Mortgage Products, Schemes and Repayment Methods
Repayment methods
Capital repayment mortgages amortise: each payment covers interest and capital, so the balance reaches zero at term. Interest-only mortgages require a separate repayment vehicle (endowment, ISA, pension, sale of property); the loan never reduces, so affordability must cover both the mortgage and the vehicle premium. Part-and-part splits the loan between the two. Offset and current account mortgages hold savings against the balance, reducing interest charged but not the capital owed, and the savings stay accessible.
Rate structures
Variable rates include the lender's SVR, trackers (base rate plus a margin), discounts and capped rates. Fixed rates give certainty for a set period then revert to SVR - the "reversion rate" used in stress testing. Early repayment charges normally apply during a fixed or discounted period; portability lets a borrower carry the deal to a new property, subject to affordability.
Schemes
Shared ownership (part rent, part buy, with staircasing), shared equity, Right to Buy, the Lifetime ISA, guarantor mortgages and Sharia-compliant structures (diminishing Musharaka, Murabaha, Ijara) all appear in questions. The Help to Buy equity loan scheme closed to new applications in 2023, so references to it are historical.
Worked example
£200,000 at 4% over 25 years: monthly rate 0.003333, n = 300. Payment = P × r ÷ (1 − (1+r)^−n) = 666.67 ÷ 0.6315 ≈ £1,056. At 5% the same loan costs about £1,169 - rate, not term, drives most of the change.
Trap: offset savings reduce interest but the contractual balance remains, which matters for LTV on a remortgage.