Interest Only or Repayment – what do you do believe and why?

Reply to the comment left by "Jeremy Smith" at "20/01/2014 - 12:06":

"..Yes, we know that over time inflation will make these debts smaller relatively (%), but they still have it hanging round their necks…"

Only been Government policy post WW2 to intentionally inflate away debt. Will it work in the current global financial enviroment? That's a question which has split opinion. '

All the above opinions are very interesting, but everyone seems to have very intelligent reasons for going both ways..................... Mark was there a particular reason you were asking Simone about borrowing in the future with regards to IO or repayment?

Reply to the comment left by "Ben George" at "23/01/2014 - 08:52":

Hi Ben

There was indeed a reason for asking whether a landlord intends to borrow more in the future.

Remember that fees are often based on how much you borrow. Therefore, what is the point of paying fees to borrow money in the first place, only to pay that money back and then pay more fees to borrow it back again?

For a landlord with no other debt whatsoever and no intention of borrowing more money I concede that in some circumstances, one of which would certainly be maintaining a suitable liquidity reserve, that a repayment mortgage might make sense. However, even in these circumstances the borrower would need to be certain that the money is borrowing is costing more than he could obtain in returns if he was to invest elsewhere.

My opinion is that a landlord paying off his debts is akin to a DJ selling off his record collection or a mechanic selling all of his tools. Debt is the most important tool of the trade for landlords.
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Reply to the comment left by "Mark Alexander" at "23/01/2014 - 09:05":

I doubt many amateur LL's have a coherent exit strategy. At least repaying the debt leaves an encumbered asset eventually. Which could then be seen to be more akin to a pension annuity that pays income for life.

Reply to the comment left by "Mark Alexander" at "23/01/2014 - 09:05":

Weh hey, Mark concedes. Frame that moment forever. We’ve got him in the corner. No, only kidding Mark.
I was thinking yesterday of this long running discussion, as this week, I’ve paid two mortgages off, six this year, although four were accidental paying too much each month. And the two I paid off, were low trackers, but had a lower limit ceiling of not going below 3%-Wa__ers! Din’t read that in the small print, did we.
And a little bit of me thinks ‘Just what if next year or two, we have a bit of a crash & I may want to buy some more because they are too cheap to refuse?’

And I have listened to u, on the low rate trackers, no point paying them off, if I can beat that rate anyway with savings elsewhere, working out Tax relief etc.

And like u say, I agree 100% u don’t want to be paying fees, then paying the mortgage off-And then 5-10 years later, paying fees again to borrow again-Hey was u a mortgage broker? The amount of times I used to tell brokers BUT I DON’T WANT TO RE-MORTGAGE EVERY FEW YEARS TO GET A BETTER DEAL PAYING FEES AGAIN-I WANT A CRACKING DEAL NOW THAT LASTS FOREVER, not one that jumps up in a few years time causing me to have to re-mortgage again.

But no, nice to see different sides of the story. I was 100% behind u Mark approx 15 years ago, & even up to 5 years ago when I did my last 3 re-mortgages.

But then missus panicking I may have an accident while skiing-Look at Schumacher. And she has a point.
Mortgages out, rents in to pay mortgages. But if few problems & no rents in for a bit, missus can’t manage. But if NO mortgages, at least no major payout with no rents in.

And there’s lots of other sides with pay off:

If u r 99% sure u ain’t buying any more ‘cause you’ve bought lots throughout your life.
If you already have enough reserves to buy the odd one should a mega bargain come up in great area u can’t refuse.
If u are now actively selling because you have too many houses anyway, so not interested in buying any more, as reducing what u have.

There’s two sides to it, but I reckon borrow as much as u cheaply can (as long as u can afford it) to start with when first starting out, then re-evaluate yourself as time goes by. U know yourself better than others. U know your plans now & future. Cover all options.
Just don’t kick yourself if u pay off too early & then bargain time comes.
And don’t kick yourself if it comes to mortgage pay off time, & u still owe the original balance & the mortgage company starts wanting their money back, but you’ve put none aside & u really don’t want to re-mortgage again, nor do u wanna sell the house.

Reply to the comment left by "Mick Roberts" at "24/01/2014 - 07:59":

Yet again I agree with your logic here Mick, it's an excellent summary of many of the best bits of advice on this thread 🙂
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