When you buy a home to live in, a repayment mortgage is the standard. But in the world of property investing, the rules change. This guide explains why interest-only debt is the primary tool for growth and how the math differs for a business.

The Main Differences Explained:

Capital Repayment Mortgage Each month, you pay the interest plus a small portion of the original loan. Over 25 years, the balance hits zero and you own the property outright. While this feels “safer” to many, it significantly reduces your monthly cash flow and isn’t always the most tax-efficient way to grow a business.

Interest-Only Mortgage You only pay the interest on the loan each month. The original balance remains the same, but your monthly payments are much lower. This is the preferred choice for many investors because:

• Higher Cash Flow: Lower monthly payments mean more money in your pocket to handle repairs, voids, or to save for the next deposit.

• Tax Deductibility: In a Limited Company structure, the full interest payment is typically a tax-deductible expense. Capital repayments are not tax-deductible.

• Inflation Protection: Over 25 years, inflation erodes the “real” value of the debt while the property value (hopefully) continues to rise.