A “Capital and Repayment” mortgage is a mortgage where the mortgagee makes monthly repayments, part of which includes a repayment of the capital borrowed as well as a repayment to the interest of the total mortgage loan.
A Capital and Repayment mortgage loan cannot be included in an Individual Voluntary Arrangement (IVA) because it is a secured debt.
A Capital and Repayment mortgage is different to an “Interest Only” mortgage, which is a secured loan where monthly payments are made up of interest payments only.
An Interest Only mortgage loan cannot be included in an Individual Voluntary Arrangement (IVA) either.
A capital and repayment mortgage runs for a set term. On completion of the fixed term the mortgage will be paid off in full.
This is the main difference between both types of mortgage, because an interest only mortgage has no fixed term. The outstanding interest only loan does not reduce each month, and therefore the whole amount borrowed will still be outstanding at any one time during the term.
Switching from a capital and repayment mortgage to an interest only mortgage can sometimes be a way of increasing a monthly contributions in an Individual Voluntary Arrangement (IVA).
If you would like to know more about Individual Voluntary Arrangements (IVAs) call 0800 088 7503 to speak to one of our trained Individual Voluntary Arrangement advisers. Alternatively visit My IVA Adviser and download one of our free guides designed to inform you about Individual Voluntary Arrangements (IVAs).
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