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Interest only or Capital repayment ???

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  • Interest only or Capital repayment ???

    Hi all,
    Just after some general advice about what type of mortgage would best suit me and my wife. We are moving abroad in 5 years but don't want to rent that time.
    We have £50,000 deposit and want to get something for around £200,000, preferably at auction to add a little value.
    Now we can't agree on whether an interest only mortgage or capital repayment is best for us.
    Our aim is to save enough over the 5 years to have a deposit for when we move, partner A thinks paying only the interest each month and saving the difference from what we currently pay in rent ( £1100 pm ) then selling the property which has hopefully risen a bit and paying the £150,000 from the sale would leave us with a larger deposit for the new house.
    Partner B thinks that paying the capital on 20 a year mortgage and selling after 5 years would leave us more for a deposit as we'd have less left to pay of the mortgage after the sale of the house.
    Any advice and pros or cons of each option would be very much appreciated.

    Many thanks

  • #2
    Hi lee and tasha
    I recently used an online broker called Hoocht who helped clear up a few queries of mine on an auction property. They’re an online broker so asking them would be pretty similar to asking on A forum but with instant replies. Might be worth a try? Website is www.hoocht.com and the broker I dealt with was Rich. He was good. Best of luck


    • #3
      Hi Guys,
      We have a calculator, which can show you not only your monthly mortgage payment, but also how your mortgage balance reduces over time (see the graphs under the calculator). So if you have an interest rate fixed for 5 years, then you can see how your balance changes. This might help you compare options. In addition, if you take an offset mortgage, you can put whatever money you save into a savings account that can help further reduce your mortgage balance during the next 5 years. We also have an offset calculator to show the impact of one-off and regular savings. You can play around with different mortgage terms, interest rates, etc., so you don't have to just guess whether interest only or repayment gives you a better solution
      I am a Mortgage Advisor
      For further information and for tailored advice:
      [email protected]