Our interest only options are designed to help support your clients in the best way possible.
Selecting interest only as a repayment method means that each month, your client's repayment will only cover the interest charged on their mortgage. Their monthly repayments will not reduce their mortgage balance, resulting in the full amount borrowed still being owed at the end of the term. To clear this balance, they must have an acceptable repayment vehicle in place.
What are the benefits?
There are many reasons as to why your client may want to opt for an interest only mortgage. Some of the key factors are:
- Lower monthly instalments; or
- Flexibility to choose how you repay your mortgage balance at the end of the term, see repayment vehicles below.
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Who is eligible for an interest only mortgage?
Interest only is available as a repayment method across our whole range of mortgages, subject to satisfying further criteria. Please note, all interest only applications are restricted to a maximum of 75% LTV, unless further restricted by product type.
Acceptable repayment vehicles
We will only consider interest only mortgage applications where a declared repayment vehicle meets our criteria and has a definite repayment term in place. The following are the only repayment vehicles that the Society will consider:
- Investment product (including pension);
- Legal charge on main residence subject to criteria,
To select this option there must be a minimum of 40% equity in the client's current residential property, or upon remortgage their debt will reduce to a maximum of 60% LTV. Independent legal advice must also be taken surrounding this chosen repayment vehicle; or
- Legal charge on & sale of a second property.
Retirement Interest Only (RIO)
Our Retirement Interest Only range can give your client flexibility, whilst still offering them the stability of being a homeowner in retirement. A RIO mortgage application differs significantly from an ordinary Interest Only mortgage, since there is no specified repayment vehicle in place to repay the mortgage and there is no set mortgage term in which the loan must be repaid. The mortgage must be repaid following a specified life event.
Your client can use the sale of their property as their selected repayment method, provided they are receiving pension income and have a minimum of 40% equity in their property. Joint applications for a RIO mortgage can be considered when both applicants are aged 55 or over, and can satisfy affordability checks individually. For more information on RIO mortgages, please click here.
For more information on our interest only mortgages, contact us and speak to our team today.