Why would I want an ‘Interest Only’ mortgage as opposed to a Repayment (Capital and Interest) mortgage?
The mental approach to this is different than the normal rationale applied to borrowing in the UK. The benefits are often very different; I) In Spain there is a ’sleeping giant’ of an issue which most home owners are simply unaware of: Inheritance Tax (IHT). Go to Question 12) for a guide to this VERY IMPORTANT issue. It is so important that any property acquisition in Spain cannot adequately be considered unless this subject is understood. Ii) Interest rates for mortgages in Spain are low by comparison to the UK and, in most cases, the capital and income employed to either meet interest payments or repayments emanates from a £ income or capital base. That being so, there is a benefit to retain as much capital as possible in £ and invest it for a higher return. For example, even cautious investment into a deposit account can generate an interest rate return of 5% as at the date of writing. With an average Euro mortgage rate of say, 3.5% the net return is at least 1.5% per annum. Over a
