# Halved My Mortgage Payments!!



## Adam RRS (May 25, 2006)

I'm 24 and paying out Â£800 a month on an interest only mortgage for Â£205,000 over 25 years. I recently heard that this could be extended a further 16 years til im 65 rather than 49 years old.

I called up my mortgage company and asked if its possible and they said yes... so now i have halved my mortgage payments!! The extra that we were paying now pays for all our bills including food!

So happy!

Now where did i put the TT Shop's number??


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## scoTTy (May 6, 2002)

I'm not sure I've seen someone so happy to be spending a lot more money on a house that he was. Have you actually worked out howmuch extra this is going to cost you?

As long as you're happy though. :?


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## YELLOW_TT (Feb 25, 2004)

Even better I only have 16 more months untill mine is finnished


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## sattan (Sep 10, 2002)

If its interest only - isn't that essentially like renting the place; but still having to fork out for repairs & maintenence - the amount owed on the capital is never decreasing.

I think I worked out that on our std. 25 year repayment mortgage we would essentially pay twice the cost of our house (if not more)... so I'm sure the mortgage co. gladly accepted your offer to pay them even more money over the coming years 

but hey, if that works for you then cool... just bear in mind what could happen when the interest rates go up; by my (unscientific) reckoning you'd be hit extra hard on an interest-only deal?


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## Karcsi (Mar 6, 2003)

That was my first thought - how are you planning to pay off the capital when you reach retirement?


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## jonah (Aug 17, 2002)

Don't forget he's 24 and curcumastances will change as he gets older, for alot of people intrest only mortgages are the only way they can afford to buy properties these days, sad but true.


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## Leg (Jan 11, 2006)

Oh dear interest only, all those years, false economy. Repayment all the way and as much as possible each month. Retire sooner that way, before ure too old to enjoy it.


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## TTonyTT (Apr 24, 2006)

:?

What's a mortgage?


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## ag (Sep 12, 2002)

Please forgive my stupidity, but how does lengthening the period of an interest only mortgage reduce the payments? Especially by increasing it by just over 50%. This can only be achieved by a reduction in mortgage interest rate or by reducing "add-ons" like overpriced life cover etc. Are the mortgage lenders expecting interest rates to go negative in about 30 years' time?

To be paying Â£800 per month on Â£205k then the interest rate is 4.75%, to halve the monthly payments it would have to be 2.375%. If you have achieved this, then well done, but I hope you have considered the likely cost of the tie in at the end because I would bet the Â£400 per month saved that they will want it back with interest!

I'm intrigued, please explain how it works.

p.s. That Â£400 per month you have spare would best be used paying off the capital or starting a capital repayment vehicle! As there are some tax advantages. But at 24 I would probably just have spent it on beer and skittles.


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## fastasflip (May 13, 2003)

Ag, my throughts exactly.

If I was younger I would have gone for an interest only mortgage for the 1st 5-10 years. I suppose it's like renting but when you come to sell, house prices would have nicely rinsen giving you a nice little deposit to start you on a repayment.

But I'm an ald git and doubt have to worry


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## Dr_Parmar (May 10, 2002)

you guys are all raining on his parade 

Good on ya Adam, drinks are on you! I'll have some of that Dom Perignon stuff, see what the fuss is about


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## Wallsendmag (Feb 12, 2004)

Do you think I could halve my Â£67 monthly payments :lol:


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## John C (Jul 5, 2002)

An extra 16 years on a Â£205k loan is about Â£100k extra on interest only and about Â£140k extra on C&I

That would go a long way at the TT Shop!

Look forward to hear how you are doing this on an interest only mortgage.


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## Adam RRS (May 25, 2006)

Interest only would be the only way we can afford this house comfortably. Obviously my circumstances will change as will my mortgage in time. I will not incur as much interest as you think as this isnt long term.

I'm only doing this for two years as I have other property ventures i am also doing which will completely pay off the house within 10-12 years after this 2 year period.

Unfortunately since labour have come into power they have made it very difficult for first time buyers to get on the ladder with a decent property. It maybe glorified renting but it will be mine in the end + i make on capital growth (so far 60k!  )


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## scoTTy (May 6, 2002)

It seems many people believe houses will pay for themselves over the period of the mortgage. i.e. double in value.

It seems a dangerous game to me but then I hate debt. I prioritised paying off the capital and it's resulted in my mortgage finishing 12.5 year early. That's 149 monthly payments that I won't have to make which is quite a saving plus of course if house prices do go up I still get the benefit of my asset appreciating.


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## Adam RRS (May 25, 2006)

scoTTy said:


> It seems many people believe houses will pay for themselves over the period of the mortgage. i.e. double in value.
> 
> It seems a dangerous game to me but then I hate debt. I prioritised paying off the capital and it's resulted in my mortgage finishing 12.5 year early. That's 149 monthly payments that I won't have to make which is quite a saving plus of course if house prices do go up I still get the benefit of my asset appreciating.


Thats great but

1. I bet yr alot older than me
2. I'm pretty sure you bought yr house a few years ago when house prices werent crazy through the roof!?

Our house is beautiful but 5/6 years ago it would have cost Â£120k and i paid Â£340k for it! My deposit alone would have paid for the house back then and i would have had change after stamp duty! Luckily for me 2 identical ones have just sold up the road for Â£400k so it was a good deal.


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## scoTTy (May 6, 2002)

Strangely I was exactly the same age as you when I bought this house.

Houses were cheaper but I was earning less than 1/3 of what I earn now. I didn't ever think I could pay it off early but the plan was always to have a repayment so that I paid less interest over the term than an interest only.

There's always different ways of doing things and no one definitive way but your original post makes it seem a strange thing to do.

I'm not sure many people when paying for mods to cars put it on their mortgage which is effectively what you're suggesting.


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## Adam RRS (May 25, 2006)

No! I was joking about that!! I would never use my mortgage to do up a car, thats ridiculous! haha

All i'm looking to do is get on my feet for 2 years, save a bit, spend a bit but be comfortable. I've got alot of great prospects heading my way but right here right now im struggling a bit... so it just seemed to make sense for the moment. It'll only go on credit cards etc otherwise and thats even more interest than my mortgage, so its the cheapest and most reliable option for me.


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## scavenger (Jun 25, 2002)

fastasflip said:


> If I was younger I would have gone for an interest only mortgage for the 1st 5-10 years. I suppose it's like renting but when you come to sell, house prices would have nicely rinsen giving you a nice little deposit to start you on a repayment.


I bought my first house on an Interest only deal, paid the interest for 10 years then sold the house for Â£6k less than I paid for it. House prices CAN go down as well as up.

Totally agree with ScoTTy. I too have a VirginOne account and its very sobering and a great incentive to actually pay off your mortgage when you go to the bank and it says your balance is -Â£xxx,xxx ....


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## Kell (May 28, 2002)

Interest only is sometimes the only way to get on the ladder.

We did it for the first four years and then sold our house for an 80k profit. 
We then switched to a repayment. Not ideal, but then if we hadn't done it, we'd probably still be saving up enough money for our deposit.


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## NIIK_TT (May 7, 2002)

Mortgage companies increasing the term of the mortgage shows me that they are trying hard to keep the property market afloat. This is good for me because I am trying to buy a very expensive property and taking quite a gamble. It is actually interest only however instead of paying off the capital - it is going towards paying off the rental properties which are at a slightly higher interest rate.

Either way I cant see a major dip in prices till at least after the next general election.

Also inflation reduces the value of debt which can help - but only slightly. But then there is the opportunity cost of having missed out investing any monies into other areas.


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## NIIK_TT (May 7, 2002)

Kell said:


> Interest only is sometimes the only way to get on the ladder.
> 
> We did it for the first four years and then sold our house for an 80k profit.
> We then switched to a repayment. Not ideal, but then if we hadn't done it, we'd probably still be saving up enough money for our deposit.


Profit is a word easily used by people when they sell . But if your moving up the property ladder it works out more expensive for you to do so. This is because a 10% increase on your current property will make the more expensive property also more expensive by the said amount. So essentially the 'profit' is not really a profit.


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## Adam RRS (May 25, 2006)

unless you sell up completely and live in yr ferrari


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## garyc (May 7, 2002)

TTonyTT said:


> :?
> 
> What's a mortgage?


Something that the Little People get all excited about. :wink:


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## Adam RRS (May 25, 2006)

garyc said:


> Something that the Little People get all excited about. :wink:


was that comment aimed at me?


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## Guest (Aug 31, 2006)

scavenger said:


> I bought my first house on an Interest only deal, paid the interest for 10 years then sold the house for Â£6k less than I paid for it. *House prices CAN go down* as well as up.


very unlikely i'd say. with the influx of immigrants, all its doing is pushing house prices up....
+ the more the government does to help people get on the ladder, the more impact it has on prices - "supply + demand" etc.. :wink:


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## garyc (May 7, 2002)

Adam TTR said:


> garyc said:
> 
> 
> > Something that the Little People get all excited about. :wink:
> ...


'People' = plural


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## hutters (Jul 16, 2002)

NIIK_TT said:


> Mortgage companies increasing the term of the mortgage shows me that they are trying hard to keep the property market afloat. This is good for me because I am trying to buy a very expensive property and taking quite a gamble. It is actually interest only however instead of paying off the capital - it is going towards paying off the rental properties which are at a slightly higher interest rate.
> 
> Either way I cant see a major dip in prices till at least after the next general election.
> 
> Also inflation reduces the value of debt which can help - but only slightly. But then there is the opportunity cost of having missed out investing any monies into other areas.


Don't forget about tax on your rental income though. You charge the mortage interest against income to reduce the profit so reducing the interest charge increases profits and more gets paid to Mr Brown. You may be better off paying off the mortgage on your primary residence with the money you would pay to the treasury.

[obviously a very general statement and I have no idea about your personal finances!]


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## Kell (May 28, 2002)

NIIK_TT said:


> Kell said:
> 
> 
> > Interest only is sometimes the only way to get on the ladder.
> ...


Not a finacial wizard, but because we moved into a completely different area with a different house price percentage rise, I think we did OK out of the deal.

If nothing else we've now got equity whereas before we had none. Of course it's not money we can spend.


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## David_A (May 7, 2002)

ag said:


> Please forgive my stupidity, but how does lengthening the period of an interest only mortgage reduce the payments? Especially by increasing it by just over 50%. This can only be achieved by a reduction in mortgage interest rate or by reducing "add-ons" like overpriced life cover etc. Are the mortgage lenders expecting interest rates to go negative in about 30 years' time?
> 
> To be paying Â£800 per month on Â£205k then the interest rate is 4.75%, to halve the monthly payments it would have to be 2.375%. If you have achieved this, then well done, but I hope you have considered the likely cost of the tie in at the end because I would bet the Â£400 per month saved that they will want it back with interest!
> 
> ...


Agreed I'm a little confused also.

If its interest only it doesn't matter how long it lasts for does it cos its the interest in the current period of the loan you are paying. Unless its added on to the loan for the long term increasing the debt.

So how does it work then?


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## ronin (Sep 6, 2003)

garyc said:


> Adam TTR said:
> 
> 
> > garyc said:
> ...


 :lol: :lol: :lol: :lol:


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## Adam RRS (May 25, 2006)

ronin said:


> garyc said:
> 
> 
> > Adam TTR said:
> ...


It seems people find you funny, have you ever thought of becoming a comedian?


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## jampott (Sep 6, 2003)

Adam TTR said:


> ronin said:
> 
> 
> > garyc said:
> ...


I don't suppose you've considered that they're laughing at him. :-*


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## phope (Mar 26, 2006)

David_A said:


> ag said:
> 
> 
> > Please forgive my stupidity, but how does lengthening the period of an interest only mortgage reduce the payments? Especially by increasing it by just over 50%. This can only be achieved by a reduction in mortgage interest rate or by reducing "add-ons" like overpriced life cover etc. Are the mortgage lenders expecting interest rates to go negative in about 30 years' time?
> ...


precisely....doesn't matter whether your mortgage term is 25 years or 40 years....the monthly interest only cost is still the same

As there aren't any 2.375% mortgage deals going around, something not quite right here...


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## ronin (Sep 6, 2003)

Adam TTR said:


> ronin said:
> 
> 
> > garyc said:
> ...


Who, as you have quoted 3 people - yourself included :roll:


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## Trax (Aug 11, 2006)

phope said:


> David_A said:
> 
> 
> > ag said:
> ...


I am worried about this, as others have said, extending an interest only Mortgage does absolutely nothing to payments - FACT.

If the original poster has reduced his payments by half, as above has said, this is 2 odd %. There are motgages out there at below 2%, I looked today and found one at 0.5% (I am a mortgage consultant). The problem is, this is for six months, then you go up to standard variable rate, tied in for FIVE years, paying 6.5% I think. Plus there were high fees, likely added to the loan value.

The original poster has not said what deal he has done, even after our questions, so I guess he's not bothered. The money he has saved should be used in overpayments, though I doubt the deal he has done will have any flexible options, he's more likely been screwed.


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## Lisa. (May 7, 2002)

Why don't you lot just say what you think instead of just beating round the bush.

The guy thinks he's made a good decision for his personal circumstances(which you don't know) if its made him feel more comfortable at the end of the month then that's all there is to it.

He's 24.

He could sell his current house in a couple of years and be in a completely different situation.

He could still be mortgage free at the age of 45.

Stop being so critical and let him do what he wants. He's lucky to be able to be able to get at mortage of Â£200+k at his age so he'd obviously doing something right.

I know my own circumstances have changed dramatically (both up and down )since I was 24 and you just have to do what right for you at the time.

I dunno, you lot are like a bunch of old dads at times.


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## John C (Jul 5, 2002)

Sorry Lisa. it's just all these young whiper snappers, spending their credit lines to the max. Wouldn't have happened in 'my' day.

And another thing, has anyone noticed the police men getting younger?

:wink:

PS Go and all spend as much as you like on loans, credit cards, mortgages etc - helps my profit sharing no end!


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## Adam RRS (May 25, 2006)

Thanks Lisa...

I will get a grasp today of exactly whats happening and put you all out of yr misery...


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## garyc (May 7, 2002)




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## garyc (May 7, 2002)

garyc said:


> Lisa. said:
> 
> 
> > Why don't you lot just say what you think instead of just beating round the bush.
> ...


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## Trax (Aug 11, 2006)

Adam TTR said:


> Thanks Lisa...
> 
> I will get a grasp today of exactly whats happening and put you all out of yr misery...


Hi Addam, I was not being critical or anything, but was just a bit worried about what you might have done, without knowing. When you said you called your mortgage lender, and they said they were happy to half you payments, just for extending an interest only mortgage, there is definately something wrong.

I can only guess that they have given you a low rate for x amount of time, but this will usually mean you have to pay their high standard variable rate for y amount of time after that, and you HAVE to pay that, because you will be tied in, so after maybe two years you will go to paying Â£1000 a month for three years - (for example).

It will be nice to know what you have exactly done, we wont shout at you - honest. 8)


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## phope (Mar 26, 2006)

I wasn't having a go either....I've been a manager with a leading bank for 14 years and have seen plenty cases of mis-selling mortgages or mis-leading customers about what a particular mortgage case entails 

I did have another root around last night and did find some rates available between 2-3% as well, so savings can be made, albeit with tie-ins/penalty clauses


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## stephengreen (May 6, 2002)

Adam TTR said:


> I will get a grasp today of exactly whats happening and put you all out of yr misery...


 Is it worth asking why you didn't get a grasp before you acted? If, knowing your own circumstances, you have done a deal that suit's you, then that's great, and I'm sure everyone is pleased for you. But i fear your inability to answer the fundamental question of why increasing the term has reduced the payment that perhaps your deal suited the arranger more than the payer...hope I'm wrong


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## TTCool (Feb 7, 2005)

Good morning Adam TTR

There's some good reading on this subject on www.thisismoney.co.uk. today and lots of info and financial advice on a variety of decisions that families have to make.

regards

Joe


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## philyuk (Jul 25, 2006)

All you old codgers out there think of it this way.

Buy house at Â£320K with Â£205K mortgage and pay interest only for 36 years at Â£900 per month at 5%. Total interest paid Â£388800 plus original Â£205000 deposit equals Â£593800 invested in the property.

However, property increase at 5% per annum over 36 years so sale price at retirement Â£1,000,000 leaving Â£406,000 profit.

Repeat five times for rental properties making Â£2,000,000 profit.

Just like renting then!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!


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## che6mw (Nov 13, 2003)

philyuk said:


> However, property increase at 5% per annum over 36 years so sale price at retirement Â£1,000,000 leaving Â£406,000 profit.


Who says? Past performance is not an indication of future performance, as my fund managers are fond of saying!


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## scavenger (Jun 25, 2002)

philyuk said:


> All you old codgers out there think of it this way.


Hmm, yes, really practical.

Think of it another way, interest rates rise to 15%, house prices deteriorate to half their purchase price, you end up defaulting on your mortgage on 5 houses instead of 1 and go back home and rely on mummy and daddy to bail you out. :?

Oh, let's not go into where you are going to get Â£3.5k per month from for mortgage payments either.

How is it on cloud cookoo land :roll: :wink:


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## philyuk (Jul 25, 2006)

Property rented out so mortgages covered by rental income.

Rates fixed so interest rate rises covered.

If after fixed period rates increase, sell and still make a good profit.

Cloud cuckoo land is fine but if you have any other questions let me know.

If everyone lived their lives thinking of the worst genuine entrepeneurs would never exit.


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## vlastan (May 6, 2002)

philyuk said:


> Property rented out so mortgages covered by rental income.
> 
> Rates fixed so interest rate rises covered.
> 
> ...


You last sentence is very valid. To make money you must invest money and take risks.

There is a always an element of risk when lots of money is involved, but you have done your calculation and you can deal with it if things go wrong. I hope it all works well for you at the end.


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## ag (Sep 12, 2002)

Don't forget the tax you will have to pay on the rental income and the capital gains tax when you sell. Plus actually finding someone who will pay a premium price to rent (i.e. cover the interest) and not delapidate the place too much and who always pays on time and that the place is always occupied and that any agency's cut is small and that the tenants actually pay the bills.

Buy to let is a good investment in the long term, people _generally_ don't start to reap the rewards until 10 to 15 years later!


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## Guest (Sep 5, 2006)

ag said:


> Don't forget the tax you will have to pay on the rental income and the *capital gains tax when you sell*. Plus actually finding someone who will pay a premium price to rent (i.e. cover the interest) and not delapidate the place too much and who always pays on time and that the place is always occupied and that any agency's cut is small and that the tenants actually pay the bills.
> 
> Buy to let is a good investment in the long term, people _generally_ don't start to reap the rewards until 10 to 15 years later!


one way to avoid this is to "move in" to the property just before you sell, then its classed as "your" home and not an investment, therefore not having to pay the taxman 40% :roll:


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## Teehee (May 22, 2005)

philyuk said:


> Property rented out so mortgages covered by rental income.
> 
> Rates fixed so interest rate rises covered.
> 
> ...


Speaking from experience, I live in Scotland but rent a house out down in England. Last weekend I had to drive down (a round trip of 1,000 miles) as out current tenants were moving out and we had to meet our new tenants.

Upon arriving at 10am as had been agreed I discovered the house to be empty and our old tenants not there. They had given our keys to our neighbour. We were not paid the outstanding rent and found that in one room paint had been spilt on the carpet - we spent 4 figures on having the house recarpeted last year.

We met our new tenants and sorted things out with them but obviously it was a bit of a downer to find what we did.

Luckily _I_ am not a muppet - read into this what you will - and have savings in place to meet my mortgage etc. However, I would hate to think of anyone to be niave enough to buy a second home for the easy money because its not.

The house in England is my pension and as has been said the benefits will come in future years when we have more capital in the house. We currently have plans in to make our one bed stone cottage into a four bed cottage and have a long term plan to build a house on the West Coast - see the other thread regarding a self build in the Highands for my idea of heaven.

I am 25, my wife is 19 (easy fellas!  ) and three years ago we started from scratch. Please do not confuse vision, ambition and aspiration with ignorance as you will find the learning curve quite extreme.


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## scoTTy (May 6, 2002)

It's true but just because you take risks doesn't necessarily mean that you're an entrepreneur.


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## David_A (May 7, 2002)

So what was the outcome - did we find out how its possible to reduce payments on an interest only. Or was chappy being stiched?


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## Trax (Aug 11, 2006)

David_A said:


> So what was the outcome - did we find out how its possible to reduce payments on an interest only. Or was chappy being stiched?


I think he looked into it and gathered he had made a mistake, either with what he did, or was wrong in what he thought he did.


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## Adam RRS (May 25, 2006)

Trax said:


> I think he looked into it and gathered he had made a mistake, either with what he did, or was wrong in what he thought he did.


correct


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## whitty (May 17, 2002)

What was it then ? - reduced for a couple of years with a tie in ?

Regards


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## Johnnywb (May 31, 2006)

AndyRoo_TT said:


> ag said:
> 
> 
> > Don't forget the tax you will have to pay on the rental income and the *capital gains tax when you sell*. Plus actually finding someone who will pay a premium price to rent (i.e. cover the interest) and not delapidate the place too much and who always pays on time and that the place is always occupied and that any agency's cut is small and that the tenants actually pay the bills.
> ...


The law regarding Principle Private Residence Relief are somewhat more complicated than that unfortunately!


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## David_A (May 7, 2002)

Adam TTR said:


> Trax said:
> 
> 
> > I think he looked into it and gathered he had made a mistake, either with what he did, or was wrong in what he thought he did.
> ...


go on then, let us all know - I'm just being nosey !


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## Adam RRS (May 25, 2006)

everyone forget everything i just said, i got it completely arse upwards and im sorry...


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## Trax (Aug 11, 2006)

No worries Adam. I was more worried that you had been lead into something not in your interest, and costing you some money in the future.

If you want to ask any questions regardings mortgages, feel free to PM me.


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