Annuity Mortgage

An annuity mortgage, also known as a repayment mortgage, is the most common type.
Your lender works out the amount you need to repay each month to clear your loan by the end of an agreed mortgage term. Your monthly repayment is made up of two parts: an interest payment on the loan and a capital repayment.
In the early years, most of your repayments will go toward paying off interest on your loan. But as your loan reduces, the interest part of the repayment goes down. So as time goes on, more of your monthly repayments go toward paying off the capital.
You can choose either a variable rate or fixed rate annuity mortgage or in some cases a mixture of both (known as a split rate).