Bram Vis answers your mortgage questions
What is the cheapest mortgage in the UK?
Interest Only – always. By never paying off even 1 penny against the amount that you borrow – the Capital. Example; you borrow £400,000 on an Interest Only basis at 2.5% per annum. That would be £10,000 per annum. That would be £833 per month – to borrow £400,000!
It is easy to see how you can get used to this monthly payment. Just two things to note; when interest rates rise - your payments will go up. If interest rates would rise and you were charged 5% then; £400,000 x 5% = £20,000 that would be £1,667 per month. If interest rates would rise further, so you were to pay 7.5%, that would be £2,500 per month. If interest rates increased still further, so you were to pay 10%, that would be £3,333 per month.
By having an interest only mortgage you ‘never’ pay off any of your capital, until the very end. Nice and comfortable in your 20s maybe but in your 40s and 50s? You may find yourself facing the prospect of repaying a hefty mortgage at the age of 65.
One way around this is to pay off at least a BIT of your capital as you are going on. If you have a £400,000 mortgage over 25 years, try to make regular payments to reduce your capital – even a bit –makes a massive difference. Your house will probably rise in value as well. So, the combination of reducing your mortgage as best you can, coupled with property price increases - can make a massive difference.
Please don't hesitate to call me directly on 020 7504 1090 or 01983 642 643 if you would like to talk, this or a similar scenario, through with me.
The information contained in this answer is for illustration purposes only and does not contain all the details required and should not be used as a personal recommendation without them. Do contact Bram if you would like an entirely free consultation to talk through your requirements, exact circumstances and best mortgage options.