Mortgage debt becomes profit centre

EveryInvestor, the financial news and comparison website, is urging homeowners to view their mortgage debt as a “profit centre”.

The website suggests that borrowers can make profits of up to £50,000 by opting for an interest only loan, thereby making only the minimum payments needed to service a mortgage.

The advice is based on the theory that investing the money that would have been used for mortgage repayments elsewhere will show better returns in the long-term.

While EveryInvestor advises that short-term debt such as credit cards and overdrafts should be paid off as soon as possible, because of high interest rates, it suggests this is not the case when it comes to mortgages.

The website’s editor, Chris Gilchrist, states that many people are not aware of “the power of compound interest” and those borrowers saving the amount they would need to repay their mortgage at its current rate, are likely to achieve “a significant surplus at maturity”.

According to Mr Gilchrist, historical data shows that homeowners who make monthly savings over long periods into stockmarket plans, such as funds, are “virtually guaranteed” to generate wealth.

He believes that using such a long-term saving plan alongside an interest-only mortgage is one of the simplest and most effective of savings strategies.

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