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Whilst I see what you are saying Brendan, I think there are more issues, and the circumstances of the borrower must be looked at.I would recommend that anyone buying a house should opt for an interest only mortgage at the start. When the house is sorted and the repayments more manageable, then you can start paying off the capital.
dodo said:You buy a house and get mortgage of 400K and pay interest only for 20yrs on it, house could be worth 1M but you still owe the 400K, If this was an investment property then profit would be 600K minus tax,but if it is your main house then you have to sell the house to pay the 400K
dodo said:You buy a house and get mortgage of 400K and pay interest only for 20yrs on it, house could be worth 1M but you still owe the 400K, If this was an investment property then profit would be 600K minus tax,but if it is your main house then you have to sell the house to pay the 400K
I hadn't interpet this as trading up. I would be less enthusiastic about an interest only mortgage for someone trading up. In the current market, you should really only trade up if you have to or if you are getting a really great bargain. It is ok to stretch yourself financially to get on the housing market, I don't think that you should do it every few years.Lansdowne is moving house - most likely trading up,
Thirdly, as interest rates are at their all time low, would it not be advisable for a home owner to pay off as much capital as possible (lifestyle permitting) in order to reduce the interest element of mortgages when rates do go up.
Brendan said:With repayment mortgages, the typical pattern is that someone buys a house and scrimps and saves to make capital repayments as well as interest repayments. After a few years, their salary has increased and the mortgage repayment becomes very low as a percentage of their income. They then regret that they made so many sacrifices when they were younger.
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