Interest only for first 5 years

dublinaam

Registered User
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Hi,

I have a €200,000 23 year term mortgage which is interest only for the first 5 years. I understand that I will then have to repay the interest & principal over 18 years.
Is there a difference in what I have to repay overall ?
 
Hi,

I have a €200,000 23 year term mortgage which is interest only for the first 5 years. I understand that I will then have to repay the interest & principal over 18 years.
Is there a difference in what I have to repay overall ?

Interest only should be used when you are struggling to meet the repayments (more a short term solution to cashflow problems). 5 years is a long time for a bank to offer Interest only, are you sure it wasnt a five year fixed interest mortgage?

Assuming you are correct, the sooner you can afford to, you should consider going capital + interest (subject to consideration of other factors - Interest rates etc).

With interest only you will owe €200k until you start paying capital. If you leave it the 5 years in essence it will of been like you paid the banks Interest of x over 5 years (think of it like a premium for you to have the money) and will of paid nothing off your house. technically your real mortgage repayments will only begin when you goto Capital + Interest.
 
The amount you have to repay doesn't change (€200k) but your monthly payments are going to increase markedly once the 5 year IO ends.

For example at 4% your monthly payment would jump from €666 a month interest only to €1,300 a month once you start repaying principal.
 
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