Interest only vs interest + capital??

dosh1

I have an interest only mortgage and much prefer this to a repayment as it gives me flexibility if I need it (which thankfully I haven't to date). Previously I have saved using Cash ISAs and high interest accounts and spread the savings too. It's getting more and more difficult now as rates are low.

I see nothing wrong with interest only mortgages but you have to be very disciplined and save money otherwise you will have a rather large big debt at the end of the term to pay.

It's a myth that you pay more interest with an interest only versus a repayment mortgage because of the full term it evens out and in fact for me is slightly cheaper. That goes to show how much interest we all have to pay with mortgages!

getmore4less

Ashley_Davis wrote: »

I'm in the process of buying my first home. I've been offered a 2 year fixed mortgage at 1.99%. The price of the house is £315,000 and I have a deposit of £144,000.

borrowing £171k

Ashley_Davis wrote: »

I have a lender willing to do an interest only on a 10 year period paying monthly interest costs of £290.

Is that 10y full term or just the length of a fix?


£171k £290pm is 2.04%

Repayment is £1577pm that means at least £1287pm needs to be put away each month unless the rate on saving are above the mortgage.

or £1425pm to start and less as the interest accrues.

HappyMJ

getmore4less wrote: »

borrowing £171k



Is that 10y full term or just the length of a fix?


£171k £290pm is 2.04%

Repayment is £1577pm that means at least £1287pm needs to be put away each month unless the rate on saving are above the mortgage.

or £1425pm to start and less as the interest accrues.

It would be a 10 year interest only period with the sale of the property being the repayment vehicle.

There is just about enough equity in the property (at least £150,000) and the LVR is almost low enough (50%) for interest only mortgages to be available on the majority of the mortgage using the sale of the property as a repayment vehicle.

There's no need to save anything.

minimike2

Is your accountant a qualified and regulated mortgage advisor? If not then it isn't in their remit to provide you with mortgage advice.

dimbo61

Please read the articles from three different papers about the Millions of people who have Interest Only mortgages and cannot afford to pay them off.

http://www.independent.co.uk/news/business/news/mortgages-interest-only-deals-a-ticking-time-bomb-for-one-million-homeowners-10485906.html




http://www.dailymail.co.uk/news/article-3221930/Mortgage-timebomb-Nearly-one-million-households-deals-t-pay-debts-face-repossession.html

http://www.saga.co.uk/magazine/money/property/mortgages/interest-only-mortgage-time-bomb#