intrest only or repayment?

alfaman105

What is the collective wisdom on this? My friend is paying only the intrest on his mortgage, he says that he saves money now (true) and that in 25 years time the capital will be small compared to his salery which will rise with inflation. He uses the example of his father who had a mortgage 25 years ago for £4000 which was a lot at the time howver when he came to the end of the mortgage he could have paid it off with 2 months salary.

It sounds a good idea but I'm sure there must be a catch

absolutebounder

There is a catch or two
1) 25 years ago inflation was higher
2) You pay interest on the full capital all the time whereas on a repayment mortgage you pay less interest because the capital is reducing.
On the other hand he is right about inflation reducing the real effect of the debt but without a crystal ball we dont know how much,