Interest and Repayments


Interest is the monetary charge or cost you pay for the privilege to borrow money. It is commonly expressed as an annual percentage rate and is the amount of money that the lender will receive from lending you the money. 

There are many factors that will affect the interest rate, such as inflation rate, length of time the money is borrowed, purpose of the borrowing, loan to value ratio and risk of default.

For most home loans, interest is typically calculated on a daily basis of the loan balance and charged each month. 


The repayment is the act of paying back money previously borrowed from a lender. Typically, the return of funds happens through periodic payments. These repayments will either be principal and interest or interest only. The principal refers to the original sum of money borrowed in a loan. Interest is the charge for the privilege of borrowing money; a borrower must pay interest for the ability to use the funds. 

An interest only repayment will not reduce the amount of money you owe, as opposed to a principal and interest repayment. 

Loans can usually also be fully paid in a lump sum at any time, though some contracts may include an early repayment fee.