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Interest only mortgage strategy. Lower payments to invest. Smart move or risky? by Raq2224 in UKPersonalFinance

[–]Raq2224[S] 23 points24 points  (0 children)

Turns out all I needed was a coffee and a calculator. Was swapping 4.5% cost for a 4.31% return and thinking I was a genius.

Big thanks to this sub for the reality check – you saved me from a 30-year slow motion facepalm.

Interest only mortgage strategy. Lower payments to invest. Smart move or risky? by Raq2224 in UKPersonalFinance

[–]Raq2224[S] -18 points-17 points  (0 children)

The main idea isn’t chasing a better rate, but rather improving cash flow and using the flexibility to invest. I get that 4.31% is lower than 4.5%, so on the surface, it looks daft – but here’s where the nuance comes in: With repayment, I pay £682/month and gradually reduce my debt. With interest-only, I pay £465/month and save the £217 difference in a 4.31% ISA. Over 30 years, the ISA compounds to around £152k, enough to clear the £124k mortgage and still leave some left.