Will sell flat after 3 years - will i get interest back for payments already made?

pre-reg wrote:

thanks...i know that is the case, but i thought i might have paid too much interest for that period as it is a 25 year mortgage and i will be paying the bank back the original borrowed amount. does that make sense? Cheers

I think I see what you mean but the main reason people take out these sort of mortgages (3 years interest only and then switch to capital repayment) is that the initial payments are lower. What happens is that you only pay the interest on the 154k for the first 3 years so at the end of the 3 years you still owe 154k then you switch to a 22 year capital repayment mortgage.

This means that the payments for the 22 years following the interest only 3 years are actually higher than they would have been if you just took out a capital-repayment mortgage from the start - ftbs often do this because it's the only way they can get a property and meet the payments and they anticipate that in 3 years wage-inflation will make the subsequent higher payments affordable..unfortunately at the moment we have low wage inflation so they really need to be getting a promotion..

The overall amount of interest you pay with this 3-year interest-only then 22 years repayment is higher than you would pay with a 25 year repayment overall - but the initial 3 years of lower payments make it attractive to some people initially.

You will still owe the lender the amount of your original loan so if you sell for the same amount you bought your accommodation for the 2 years will have cost you the interest payments you have made plus stamp duty and solicitors costs and any fees the lender may apply for early repayment of your loan. If this is less than renting would have cost you then you are not out of pocket..