| Comment | We're both right to a degree. I was considering the % across the span of the loan. From day 1, the percentage that is paying off the interest would be 62.5% but as you pay off more of the debt / gain equity of the asset then you pay almost nothing as a % of the monthly payment in interest which is why early payment of mortgages isn't permitted by most lenders.
At 3.92% interest, you pay £138,000 total for a property valued at £88,000. If you pay £460 per month you can think of it as 64% going towards the asset and 36% going towards the interest payment over the lifespan of the loan. In reality though in the first month of payment you will be paying as high as 62.5% of the mortgage bill in interest while in the last month you'll pay 3.92%.
In that time, the property will most likely appreciate to £137,000 in value where you'll have to pay capital gains tax on £49,000 from the increase in value of the asset. |
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