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Advice on Interest Only method please
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sasilverman
Posts: 51 Forumite
A financial advise gave my friend this advice, was wondering on what everybody thought?
Suppose an interest only mortgage came to £400 per month
Now suppose I did an I+C mortgage, which came to £500 per month
I would assume that the £100 difference would go straight against the capital.
According to this adviser this is not the case! Apparently only a small proportion of this goes against the capital, the rest against the interest!
Their advice is to take the £400 interest only mortgage and put the other £100 into a high interest account. Then at the end of your 2 YR fixed rate (for example) remortgage with the £2,500 against the capital.
Then repeat the process.
Is this right? Any thoughts?
Suppose an interest only mortgage came to £400 per month
Now suppose I did an I+C mortgage, which came to £500 per month
I would assume that the £100 difference would go straight against the capital.
According to this adviser this is not the case! Apparently only a small proportion of this goes against the capital, the rest against the interest!
Their advice is to take the £400 interest only mortgage and put the other £100 into a high interest account. Then at the end of your 2 YR fixed rate (for example) remortgage with the £2,500 against the capital.
Then repeat the process.
Is this right? Any thoughts?
0
Comments
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your friend is wrong - anything above the interest element will reduce the capital. Interest only is OK if you are confident that your investment return will be higher than the mortgage rateI am a Mortgage AdviserYou should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it.This signature is here as I follow MSE's Mortgage Adviser code of conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.0
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