### understanding mortgages

Mortgages can sometimes be **tricky** to understand. With so many
variables to the equations sometimes we don’t know how much a month
we would need to pay back. Firstly there are **two types** of mortgages;
**repayment** and **interest only**.

### repayment mortgages

A repayment mortgage is very **simple**, every month you pay
back a certain amount of the money borrowed along with the interest.
The repayment is based on the **LTV**, **interest rate** and
the **loan term**. The theory stands the shorter the term,
the less interest you will be paying on it, and vice a versa.

### interest only mortgages

An interest only mortgage is slightly different and generally
seen as the **unconventional** way for a mortgage. It is the
mortgage with **less fixed payment** every month, so
subsequently the **cheaper** out of the two. It works by the
borrower paying back **only the interest** for the loan and this
depends on the term of mortgage. After the term is complete the
**original loan amount** would be **due**.

### repayment calculator graph

So with many variables to take into account, what a **mortgage
repayment calculator graph** does is shows a summary of what your
repayment may be.

The above mortgage repayment calculator graph shows how a repayment
mortgage would work. Taking an estimated **8.5% interest rate**,
you can see that **£600,000** is the total amount **payable** by the
borrower on a **£250,000 loan**. With the term time decreasing,
the payable with interest also decreases. The difference between
the blue dots and the red dots shows the **interest**.