repayment vs interest only!

peiluj

I have a repayment mortgage at end of its fixed rate and am looking at re-mortgaging to keep my payments down. If I'd gone for an interest only mortgage and saved the difference (£200 per month) I would have been slightly better off. I understand that most of the early payments go on interest but I can't help thinking I should have put the money in an ISA and re-mortgaged for a slightly lower loan amount now. Am I being naive?

So, I'm trying to decide what to do for the next 2 years or so and am wondering if I should consider going interest only. I would save most of the £200 but not all. In 2-5 years things should be easier - assuming my salary increases and interest rates remain low! I am a very cautious person so the thought of having an interest only loan with no means of repaying the capital fills me with horror. However, is it necessarily a bad thing as a temporary measure? I would then look to re-mortgage in (say) 2 years, repayment basis, reducing the term and paying off some of the capital with my savings.

Apologies if this is a daft question but I am tying my brain up in knots trying to weigh up my options and your opinions would be very welcome.