Richard is a single parent living in a two-bedroomed semi-detached house in Sunderland. He works as a full-time psychiatric nurse. When he bought the house in October 2019 the mortgage broker talked him through repayment and interest-only mortgages. He decided to use his savings as a deposit and chose a repayment mortgage which, by October 2021, had an outstanding balance of 130,000. The original purchase price in 2019 was 166,000 and the market value of his house has increased by 2% over this period.

In October 2021 Richard earns a net monthly income of 2,200 and his expenditure has averaged 2,300 a month over the last two years. In October 2021 a loan to conduct an initial refurbishment (an updated bathroom) is down from 3,000 to 1,500, but his current account balance has dropped to zero and he has an overdraft on his current account of 1,000. Meanwhile, his savings account holds just 150 and he also owes 2,000 on a credit card. The rest of his balance sheet has not changed since October 2019.

He is reviewing his finances as he would like to take his 8-year-old daughter on holiday abroad.

Table 1 shows his balance sheet and financial ratios in October 2019.

Table 1 Richards household balance sheet October 2019

	October 2019 ()
Assets (Total)	168,100
Liquid assets	2,100
Cash	100
Current account	1,000
Instant access savings account(s)	1,000
Other liquid assets	0
Other assets	166,000
Home	166,000
Liabilities (Total)	141,500
Short-term liabilities	1,000
Overdraft	0
Credit card	1,000
Other short-term liabilities	0
Other liabilities	140,500
Personal loans	3,000
Mortgage	137,500
Ratios
Net worth / wealth	26,600
Current asset ratio	2.1
Leverage ratio	84.18

3.5Explain the factors Richard might have considered in choosing a repayment mortgage over an interest-only mortgage in 2019.