Which type of mortgage is most appropriate if the loan is to be repaid in full by the end of the term, including interest?

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

Answer: (A)

Repayment happens as part of the payment plan, where each payment covers both the interest charged on the outstanding balance and a portion of the principal. Over the term, the balance reduces until it reaches zero, so the loan is fully repaid by the end, including the interest paid over the life of the loan.

An interest-only arrangement would only pay the interest during the term, leaving the original loan principal outstanding to be repaid separately at the end. An endowment mortgage is typically structured to repay the principal at the end via the endowment policy, rather than reducing the loan during the term. A flexible mortgage can change payments or terms, but it doesn’t inherently ensure full repayment by the end unless it’s specifically arranged as a repayment loan.