The Society will consider 'interest only' mortgages. However this option is not available on Shared Equity, Shared Ownership or where the term extends beyond stated retirement.
Interest Only mortgages are available up to 60% LTV with additional lending on a Capital Repayment up to 75% LTV on a ‘Part & Part' repayment basis – see product availability.
Whilst the Society may choose to accept a repayment strategy, acceptance does not guarantee that the proceeds will be sufficient to repay the debt in full. The Society will seek to satisfy itself that the repayment strategy is clear, credible and appropriate.
Where relying on savings, investments or pension to repay the advance, the repayment strategy must have been in place for a minimum of 12 months. Borrowers should regularly assess the value of their investment(s), seeking independent financial advice where appropriate.
Borrowers should make appropriate life insurance for the life of the mortgage to ensure the outstanding debt balance is repaid in full. Such policies are not assigned to the Society.
Up to three repayment strategies can be used to cover the value of the Interest Only element and must be in pounds sterling. Repayment strategies include:
Pensions: 25% of the expected pension pot based on the central (or lower) growth estimate in the latest pension statement (within last 12 months).
Regulated Investments (Endowment Policies): The Society will consider existing regulated investments, based on the projection of the investment using the central growth scenario and evidenced by the latest statement (within last 12 months).
Savings & Investments: Established savings / investments, where the value is at least equal to the amount advanced; evidenced by latest statement / valuation (within last 12 months).
Where an individual intends to rely on a combination of existing savings, supplemented by future regular saving, the Society will consider whether the combination represents a plausible repayment strategy.
Stocks & Shares: Shares should be in FTSE 100 / 250 Companies, with a minimum of 3 companies within the portfolio. Evidence of value and ownership must be provided.
Sale of Mortgaged Property: Where sale of the mortgaged property is the intended repayment strategy, sufficient equity at the end of the mortgage term must exist to provide a plausible downsizing option. The equity can be comprised of the deposit and the amount repaid under capital and interest terms. This recognises that upon sale of the property, the customer will need to repay the loan and purchase another home.
Details of the intended downsizing property type and location (postcode, town, region), should be declared using the free text fields within the AIP process.
Sale of Other Property: The Society will accept equity in ‘other' properties as an intended repayment strategy. A plausibility check will be undertaken against the estimated level of equity.