Interest Only Lending

The Society offers a flexible, tailored approach to its mortgage services, and is able to accept mortgages on a repayment basis, interest-only basis or mixed repayment/interest-only method.

Many people choose an interest only mortgage, or a mixed repayment / interest only method as it can mean that monthly payments will be lower than a repayment mortgage.

With an interest-only mortgage, repayments only cover the interest on the amount borrowed and nothing off the original loan. Applicants must put in place and maintain a suitable repayment plan or strategy (referred to as a repayment vehicle) to pay off the balance at the end of the mortgage.

Interest-only mortgages require that only the interest during the term of the mortgage is repaid. The mortgage balance itself remains at the same level throughout the mortgage term.

Interest-only criteria*:

  • Maximum loan to value (LTV) on interest-only loans is 50%
  • Minimum income of £50,000 p.a. (for joint applications, at least one party must have an income of £50,000 p.a. or more)
  • A mix of interest-only and repayment is allowed up to the LTV product limit but the interest-only element must not exceed 50% LTV 
  • Evidence of a suitable repayment vehicle is required for all interest-only or part interest-only residential applications. Suitable repayment vehicles are:

  1. 1. With-profits or Unit-linked endowment policy

  2. 2. Sale of another UK property

  3. 3. Pension lump sum

  4. 4. Cash savings
  • A mortgage offer will only be issued once the Society has evidence of a suitable repayment vehicle that meets our criteria. Documentary evidence of the repayment vehicle should be submitted at the time an application is submitted
  • The maximum LTV on interest-only loans of 50% will not apply to existing borrowers who will be allowed to port their interest-only loan if they move house. If additional borrowing is required then this must proceed on a repayment basis
For details of the charges payable in connection with a mortgage application, please refer to our Tariff of Mortgage Charges.

*Only applies to residential lending where the loan to value is 80% or less 

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