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What is the difference between interest-only and capital repayment mortgages?

With an interest-only mortgage, your monthly payment will only cover the Interest charge on your mortgage and your actual mortgage balance (or capital) will not reduce. Therefore, at the end of the mortgage term, your balance will be the same as the original amount borrowed.

With capital repayment, you will not only be covering the interest charge but also some of the capital borrowed each month, which means that as long as you keep up with repayments, your mortgage will be paid off at the end of the mortgage term.

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