Are you confused by your mortgage options?
Why are nearly all investment mortgages interest only, rather than capital repayment?
Surely it’s crazy to only repay the interest and leave yourself with the loan at the end, right?
Wrong.
Actually, it’s not crazy for one simple reason:
All property investors understand the COST of not re-investing.
They understand they can make their money work ‘harder’ by leveraging and re-investing along the way instead of paying off the loan as they go.
It makes far more sense to invest that money and compound the returns, and let it go up and up and up.
Here is something you may not know, but are extremely important if you want to become a profitable investor:
Just 20 years ago you could buy a property for £5000 [compare that to a heavily over-priced bottle of champagne in Mayfair now for £35,000 – things have clearly changed a lot!]
This means over 25 years all of the money that you pay towards your repayment mortgage will actually be worth much less than what you paid for it relatively.
When you choose repayment mortgages most of what you pay back [in the early years] is interest or ‘top heavy’ [because the lender knows you are likely to leave them over the term and they want to make their money too.]
Imagine your first repayment as 99% Interest, 1% Capital and you will be pretty close to the truth.
So, when it comes to Interest Only versus a Repayment mortgage, here’s what you need to know…
ONLY take out an Interest Only Mortgage if you:
Want to improve your monthly cashflow [your mortgage is less] per property…
Want to build your funds which you can use to re-invest and leverage your cash…
Don’t want to suffer from the rule of inflation – the money you have been paying will be worth less than what you paid for it (£250K in 25 years time is not the same as £250K today)…
ONLY take out a repayment mortgage if you:
Have no plans to invest in property further…
Have no plans to re-mortgage, or take out any equity over the 25 years…
Are comfortable paying off in today’s money an amount which will be worth a fraction of this in 25 years time…
Yes, it can all be a bit overwhelming, can’t it?
Don’t worry – we have dozens of real life examples that walk through every step of the investment scenario for you.
But once you have a firm grasp of the way Property works, you’ll quickly see the Big Picture AND start tapping into this fantastic investment opportunity with the gusto and confidence you need to succeed.
For now, using the laws of re-investment, leverage and compounding the capital you have saved and re-invested will be leveraged up to 12,000% [120 times – a lot] over 25 years.
