Interest only option with intent to move in 3-5 years

[HouseHunter]

My partner and I are close to closing and we are wonder if we should take an int only option for the first 3 years with the intention of selling on in 3-5 years time. I understand that we would not pay anything off the capital owed in the first three years but surely we would still have the equity, provided some accumulates.

Our reasons for doing so are two fold. We need to finance a loan to pay for furniture, some works etc and to pay off some outstanding debts (though not significant) and secondly we want to build up a savings and investment fund.

The aim is to move to a second property virtually debt free and with a good savings and investment fund behind us.

Obviously we would experience a significant increase in mortgage repayments after the 3 yrs but we have been paying out the balance anyway.

I would be grateful for any advice on this strategy.

 

[Eurofan]

To play devils advocate, what happens in the event of a downturn in the property market leaving you with negative equity? Could you handle this possibility?

 

[terrysgirl33]

Under those circumstances I would rent and save as much money as possible to pay off debts and save. If you are planning on moving in a few years there is no point buying furniture and doing up a house.