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Straight-line repayment plan |
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The mortgagor pays regular instalments of a fixed amount throughout the whole repayment term. The interest portion in the repayment instalment will gradually decrease while the principal portion will gradually increase as the mortgage loan is repaid.
When there is an increase or reduction in the interest rate, either the number of repayment instalments or the amount of each repayment instalment will be adjusted accordingly depending on the prior arrangement between the mortgagor and the bank (see the Monthly Mortgage Repayment Table in Appendix 1).
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2. |
Plan with principal repayment holiday |
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A mortgagor can make repayment instalments that cover the interest only but not the principal payment for part of the repayment period, normally the initial two or three years, and pay the principal and interest for the rest of the repayment term on a straight-line basis. It should be noted that the total amount of interest to be paid on a mortgage loan with deferred principal repayment is actually larger than that under a straight-line repayment plan of the same loan tenor. Furthermore, the monthly repayment instalments will be larger after the repayment holiday. A borrower contemplating such a plan should take these factors into consideration. |
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3. |
Progressive repayment plan |
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The amount of repayment instalments accelerates periodically, for example, annually, to speed up repayment of the whole loan, thereby saving the total amount of interest payable. This plan is suitable for those who expect to have periodic income increases and would like to have the whole loan repaid over a shorter period. |
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4. |
Flexible prepayment and redrawal plan |
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This plan gives the mortgagor freedom to make prepayments, each of a certain minimum amount, during the repayment period in addition to his regular instalments to shorten the tenor of his loan. If the mortgagor needs cash at any time during the repayment tenor, he can request an amount, usually not exceeding the amount he has prepaid, to be redrawn and to form part of the mortgage loan and the remaining tenor of the loan will be lengthened as a result. |
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5. |
Bi-weekly repayment plan |
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Under a fortnightly repayment plan, the mortgage repayment period can be shortened and savings on overall interest may also be achieved. |