Interest only mortgages

Reviewing your mortgage repayment plan

With interest only mortgages, your monthly repayments only pay off the interest on the amount borrowed. At the end of the mortgage term, you must pay off the amount you borrowed when the mortgage began.

To do this you can use savings, investments or other assets you have. We call this a 'repayment strategy'. 

If there is a chance of a shortfall, there may be simple changes you can make. You could make overpayments on your mortgage or switch to a repayment mortgage.
Acceptable Repayment Strategy Policy Rules
Sale of Mortgage Property at the end of term
  • This can be used to cover up to a maximum of 60% of the value of the property.
  • Total borrowing can go to 85% LTV (a maximum of 75% can be on Interest Only) by using an additional repayment strategy or borrowing on a Capital Repayment basis.
  • The property must have a minimum equity of £250,000 at the time of application for non London properties and £300,000 for properties located in London.
Sale of other UK property
  • A Maximum of 75% of the equity in the property can be used as your repayment strategy.
  • The property must be in located in the UK.
  • The property must be in your name/s only with no other parties named.

Evidence required
If any property is mortgaged by another lender, a copy of the latest mortgage statement.
Pension Lump Sum
  • For defined contribution schemes and Self Invested Pension Plan (SIPP) – A maximum of 60% of tax-free lump sum (15% of total pension pot) can be used towards your strategy.
  • For defined benefit schemes – A maximum of 90% of the tax free lump sum can be used towards your strategy.
  • Your full mortgage term must take you beyond the age of 55 and your declared retirement age must be at or before the end of the term of the mortgage.

Evidence required
Latest Pension Statement.
Savings
  • The current value of the savings must cover 100% of the I/O element. The total can include eligible investments referred to below.
  • The savings must have been held for a minimum of 12 months.
  • The savings must be in pounds sterling.

Evidence required
Latest savings statement.
Existing Endowments
  • The projected mid-point maturity value must cover 100% of the interest only borrowing.
  • The endowment must have been in place for at least 12 months.
  • The end of the endowment term must not exceed end of mortgage term.
  • It must be a UK Policy provided by a regulated firm.

Evidence required
Latest endowment policy statement, dated in the last 12 months.
General Investments
  • The current value of the investments must cover 100% of the I/O element of the mortgage. The total can include eligible savings referred to above.
  • The investments must be in pounds sterling.
  • The investment must have been in place for a minimum of 12 months.

Evidence required
Stocks and Shares ISA, Unit Trusts/OEIC, Investment Bonds: copy of latest statement
and/or
Stocks and Shares ISA: copy of share certificates/statements containing evidence of share-holdings and their valuation.

As a responsible lender who puts customers at our heart, we want to help you make sure you can repay your mortgage. 

We've been contacting customers with interest only mortgages to discuss their repayment strategy. This is following guidance from the Financial Conduct Authority (FCA), who regulate mortgages. They've told mortgage lenders it’s good practice to contact customers to ensure they know what their options are. 

If there's a shortfall in your repayment strategy, our team of qualified mortgage advisers will contact you. They will talk through your current situation and may be able to work out a plan to support you. Any changes will be mutually agreed.
 

Tell us how you intend to repay your mortgage

 

Telephone us

You can talk to one of our advisers on free phone 0800 138 1009. We are available from 8am to 8pm Monday to Friday and from 9am to 1pm on Saturdays.

Complete our online form

Fill in the form below. We'll need to take details for each account holder named on the mortgage and any repayment plans in place. 

If you wish to talk to us as well, we're happy to call you. At the end of the form, you can select if you wish us to call you, and when (morning or afternoon). If you select a call back, we'll be in contact within two working days.

Disclaimer

Your property may be repossessed if you do not keep up repayments on your mortgage.

If you have a Buy to Let property, then alternatively a receiver may be appointed (except in Scotland) to receive the rent and/or to sell the property. After sale, you will remain responsible for the payment of any mortgage shortfall debt.