Which mortgage type is described as a loan repaid over time with regular payments of both principal and interest?

• A. Interest-only mortgage
• B. Endowment mortgage
• C. Pension mortgage
• D. Repayment mortgage

Answer: (D)

The concept here is loan repayment through regular payments that include both interest and a portion of the principal, so the balance falls to zero by the end of the term. A repayment mortgage does exactly this: each payment covers interest on the outstanding balance and reduces the principal at the same time. Over time, the interest portion decreases while the principal portion increases, and after the term ends the loan is fully repaid.

In contrast, an interest-only mortgage requires payments that cover only the interest during the term, with the original loan amount due in full at the end. An endowment mortgage uses a separate endowment policy to provide the lump sum needed to repay the loan at the end of the term, rather than reducing the principal through payments. A pension mortgage works similarly by relying on a pension arrangement to fund the repayment at maturity rather than gradually paying down the loan principal.