IO mortgage - Invest the difference

leejhopwood

Should I switch to Interest Only mortgage and invest the extra cash in savings/investments.
I'm sure this has probably been asked and covered in here before, but here goes...

I need to remortgage as my current 5yr fix ends in 01/2025.

Mortgage is approx 1.6% on £175,000 - 18 years remaining term - House value is £345k

I'm looking to move house (I live in the house) in the next 2years, so considering moving to an IO mortgage for 2yr fix.

current is deal offers are approx 4%, so the monthly repayments will be £550 less than a new repayment remortgage over 2 year fix.
My thinking is that I would save/invest the spare cash over those 2yrs, to make more use of that money, then use that lump some to inject into a new house purchase (when I move on c.2027)

My sums are 24 months x £550 =  £13,200

So if I can get a return on this > 7-10% (from savings/investments) then I'll have an extra amount (say £14,520) to put towards a new mortgage when I sell this property.

For clarity, I plan to sell this house (Q1 2027), rent for a while then buy a new house in Q3/Q4 2027.

Is this a daft plan?

Obviously I need to factor in any profit taxes etc. but would assume that because I'm under £20k this would be negligible.

Thanks

 

Keep_pedalling

7-10% returns on short term interest / investment is not possible without high risk.