Interest Only Residential Mortgages
An interest only mortgage means that you only pay the interest element of a mortgage when you make your monthly repayments. This leaves the capital element to be paid by you as a lump sum at the end of the mortgage term.
In order to repay this lump sum at the end of the term, you must be able to demonstrate an acceptable repayment strategy when you apply for an interest only mortgage. Acceptable repayment strategies include:
- savings and investments (including endowment policies and existing Personal Equity Plans)
- pension lump sums
- a portfolio of stocks and shares or a stocks and shares ISA/NISA
- the sale of a mortgage/debt free UK located Buy to Let or holiday home that is owned by the mortgage applicant(s) on a Joint Tenant basis
- property downsizing, is acceptable on selected mortgages when the whole of the loan is interest only and the mortgage is to be repaid before age 70 (before age 80 via mortgage intermediaries). To qualify, there must be a minimum equity of £150,000 and this must be sufficient to provide a reasonable quality home in the property locality.
Our underwriting team will assess your individual circumstances and whether the repayment strategy is acceptable to ensure that you can meet your commitment to repay the capital element at the end of the mortgage term.
Subject to individual product terms and conditions, we offer interest only mortgages up to 75% Loan to Value (LTV). Provided the interest only element does not exceed 75% LTV and the term will not extend into retirement, you can also split your mortgage into part capital repayment and part interest only repayment options on loans up to 90% LTV.
Please find below our current residential mortgage products available on an interest only basis.
|Mortgage Product||Term||Initial Rate1||Overall Cost for Comparison2||Max LTV3||Early Repayment Charge||Product Fees|
3 Year Discounted Rate - MPD001
|3 years||Currently 3.74%||4.9% APRC||80%||3%||£199 application fee, £1200 completion fee|
3 Year Discounted Rate - MPD002
|3 years||Currently 3.18%||4.9% APRC||70%||3%||£199 application fee, 0.50% completion fee|
2 Year Discounted Rate - DID133
|2 years||Currently 2.44%||5.1% APRC||over 80% and up to 90% LTV||2%||£199 application fee, £300 completion fee|
2 Year Fixed Rate - DIX201
|2 years||2.99%||4.9% APRC||up to 90%||2%||£199 application fee, £800 completion fee|
2 Year Discounted Rate - DID134
|2 years||Currently 1.99%||4.7% APRC||80%||2%||£199 application fee, £800 completion fee|
A mortgage of £269,000 payable over 20 years initially on a fixed rate of 2.89% for 2 years and then on our current standard variable rate of 5.34% for the remaining 18 years would require 23 monthly payments of £1,481.67 and 216 monthly payments of £1,799.10 plus one initial interest payment of £594.74.
The total amount payable would be £424,707.75 made up of the loan amount, plus interest and fee(s) totalling £155,707.75. This includes Application Fee (£199), Chaps Fee (£25), Legal Fees (£255), Completion Fee (£800) and Redemption Administration Fee (£150).
The overall cost for comparison is 5.0% APRC representative.
1 The Initial Rate is the rate available during the initial term of the mortgage. Once the initial rate term has expired, the mortgage will revert to our Standard Variable Rate (SVR).
Our SVR is set by us and is currently 5.34%, as a variable rate it may go up or down.
2 The Overall Cost for Comparison is given as the Annual Percentage Rate of Charge (APRC) and includes all charges incurred relating to the mortgage. The APRC is intended to help you as a borrower compare the interest rates on different products.
3 Like all other mortgage lenders, we will allow you to borrow against a proportion of the overall property value. This is known as Loan to Value (LTV) and is expressed as a percentage. For example, if you want to purchase a property at £100,000 and you would like to borrow £85,000, then you will need a mortgage available at 85% Loan to Value (LTV). The available LTV can vary depending upon the type of mortgage.
Shared Ownership mortgages will offer two percentages under LTV - the proportion of the property value and the proportion of the share being purchased.