Interest Only Mortgages
The Society will accept mortgages on a repayment basis, interest-only basis or mixed repayment/interest-only method.
For those which are either on an interest only or part and part basis, the Interest-only criteria (Only applies to residential lending where the loan to value is 80% or less) is as follows:
- Maximum loan to value (LTV) on interest-only loans is 80%
- Minimum income of £18,000 p.a. (Household)
- A mix of interest-only and repayment is allowed up to the LTV product limit but the interest-only element must not exceed 80% LTV where the sale of the property is the repayment vehicle or 75% LTV where the Society does not have control over the repayment vehicle.
- Maximum of £500,000 on interest only where the mortgaged property is the repayment vehicle and our only security. If a higher amount is required, please contact us to discuss
- Evidence of a credible repayment strategy / suitable repayment vehicle is required for all interest-only or part interest-only residential applications. Suitable repayment vehicles are:
Acceptable Repayment Strategies/Vehicles
The following are considered acceptable repayment strategies for Interest Only mortgages:
- Sale of property other than the main residence being occupied by the customer (could include Buy To Let, Holiday Homes, Commercial Property, Land, etc) - Evidence of ownership of properties being considered for this purpose to be supplied to the Society along with details of any existing secured lending against such property.
- Sale of the main residence being occupied by the customer - provided there is a minimum equity of £165,000 remaining after taking the Society’s loan into account if in Wales or the average house price of the area the property is located if in England. (However, each case will be reviewed on its own merits.)
- Pension lump sum – must be supported by up to date information from the Pension provider showing current and anticipated benefits.
- Endowment lump sum - must be supported by up to date information from the Endowment provider showing current and anticipated benefits. The Society may require assignment of the Policy.
- ISA’s – must be supported by evidence of current funds invested to repay the mortgage.
- Sale of business – the Society will use its discretion in assessing this as a repayment vehicle.
- Repayment of a director’s loan from a business owned by the borrower – by sight and evaluation of the latest financial statements from the accountant evidencing the existence of the directors’ loan.
- Realisation of other investments, e.g. shares, bonds, etc. As for ISA’s the Society will require up to date evidence of the value of the investments to repay the mortgage
- Summary of Verification of Repayment Strategies
The Society will verify repayment strategies as follows:
- Sales of property– by valuation of the property by a qualified Chartered Surveyor, or a Land Registry search confirming the purchase price paid.
- Pension Lump Sum – by up-to-date documentary evidence supplied by the Pension Provider(s).
- Endowment Lump Sum - by up-to-date documentary evidence supplied by the Endowment Provider(s).
- ISA’s – by current balance verification from the ISA Provider(s).
- Sale of Business – the Society will use its discretion in assessing this as a repayment vehicle.
- Repayment of a Directors’ Loan from a business owned by the borrower - by sight and evaluation of the latest financial statements from the accountant evidencing the existence of the directors’ loan.
- Realisation of other investments – by reference to up-to-date statements from the investment providers.
Please contact your local mortgage manager today for more information.
Alternatively, please complete the call me back page and one of our mortgage managers will contact you.