Interest-only mortgages

The maximum LTV we will currently consider lending on interest-only mortgages is 75%.

As a responsible lender, it is important for us to see evidence of the repayment plan for interest only mortgages so documents relating to the repayment plan must be received before a new mortgage offer can be considered.

Repayment plans

The following repayment vehicles are unacceptable:

Customer's main residence
The property being taken as security (excluding Buy to Let applications only)

The table below shows the repayment plans we accept and the evidence required in each case. It also shows the methods we use to assess whether a repayment plan meets our lending criteria. This information is only a guide . A mortgage offer will only be issued once we have confirmed that the evidence supplied meets our criteria.

Repayment Vehicle	Evidence Required	Validation	Assessment Method
Endowments	Copy of latest projection statement dated within last 12 months	We will compare the projected values on the statement to the amount of Interest Only lending required. If more than one value is given we will take the middle value.	Endowment companies will present three growth rates to a client with the middle one being the most likely projected outcome. We allow up to 100% of projected amount using the middle % or the lower projection if there are 2 growth rates.
Sale of Second Home/Buy to Let(UK)	Property details, confirmation of ownership, amount of any mortgage debt (Property valuation and land registry search carried out by us if needed).	We will verify the ownership of the second property and its value. We will compare the equity available in the property with the amount of Interest Only lending required. (See Second Home/Buy to Let Details)	We will check the ownership of the other residential property and assess its value. We will compare the equity available in the property with the amount of Interest Only lending required. Current equity within the property must be over £50,000. We will use 80% of the current equity value of the property to support Interest Only lending. Please note that there is a minimum greater than £50,000 equity requirement for each individual property being used to support Interest Only lending.
Sale of second home/Buy to Let not yet purchased (UK)	Property details, Acting Solicitor to confirm intended ownership of the second property, details of any loans to be secured against this property (Property valuation and land registry search carried out by us if needed).	We will verify the intended ownership of the second property and its value. We will consider any loans to be secured against the property and the equity that will be available in the property with the amount of Interest Only lending required. See Second Home/Buy to Let Details)	We will confirm the intended ownership of the second property prior to offer on the new mortgage / further advance. Current equity within the property must be over £50,000. We will use 80% of the current equity value of the property to support Interest Only lending. Please note that there is a minimum greater than £50,000 equity requirement for each individual property being used to support Interest Only lending.
Stocks & shares (Only UK - based investments quoted within the FTSE index held in sterling will be permitted.)	Share valuation/and or number of shares on date of assessment. Share statement or sharecertificate dated within the last 12 months.	We will compare the value of the shares with the amount of Interest Only lending required, taking into account the remaining term of the mortgage and future market volatility.	See - Stock & share ISA.
Stocks & Shares ISA (Only UK - based investments quoted within the FTSE index held in sterling will be permitted.)	Copy of latest investment statement dated within last 12 months	We will compare the value of the ISA with the amount of Interest Only lending required, taking into account the remaining term of the mortgage and future market volatility.	We will compare the value of the ISA/Investment Bond/UnitTrust/OEIC with the amount of interest only lending required, taking into account the remaining term of the mortgage and future market volatility. We will only take 80% of the current value of the investment into account and the current value must be greater than £50,000*.
Unit trust or OEIC	Copy of latest investment statement dated within last 12 months	The current value will be compared to the amount of Interest Only lending requested, taking into account the remaining term of the mortgage and future market volatility.	We will compare the value of the ISA/Investment Bond/UnitTrust/OEIC with the amount of interest only lending required, taking into account the remaining term of the mortgage and future market volatility. We will only take 80% of the current value of the investment into account and the current value must be greater than £50,000*.
Pensions	Copy of latest statement dated within last 12 months	Copy of latest projection statement dated within last 12 months	For the purposes of backing an interest only mortgage, a maximum of 25% of the current fund value with the current value to be greater than £1 million. Where clients are on a final salary pension scheme 100% of the current lump sum can be used, onlyif it is greater than £250,000. Pensions can be combined to reach the £250,000 and there is no need for confirmation of the full fund value.
Investment bonds	Copy of investment statement dated within the last 12 months	We will compare the value of the bonds with the amount of Interest Only lending required, taking into account the remaining term of the mortgage and future market volatility.	We will compare the value of the Investment Bond with the amount of interest only lending required, taking into account the remaining term of the mortgage and future market volatility. We will only take 80% of the current value of the investment into account and the current value must be greater than £50,000*.

All repayment vehicles must be based in the UK and paid in sterling and must be in the name(s) of the mortgage applicant(s).
Only repayment vehicles for those customers named on the mortgage may be used to support the loan.
The applicant will be able to use a combination of the acceptable repayment vehicles. The following repayment vehicles can be combined together or can be mixed and matched to reach the minimum £50,000 acceptance criteria:
- Stocks and shares ISA
- Unit trust or OEIC
- Investment Bonds
- Stocks and shares

Important points on the assessment:

The repayment plan(s) must be sufficient to support the existing lending and cover the full amount to be conducted on an Interest Only basis.
We are not providing advice on your applicant's repayment plan(s) or making any guarantee that their plan(s) will be sufficient to repay the outstanding balance (capital) at the end of the mortgage term.
Your applicant should review their plan(s) regularly during the term of their mortgage to make sure it is on track to repay the outstanding balance.
Periodically, we will ask your applicant to provide evidence of their repayment plan(s). If your applicant is unable to satisfy us that their repayment plan(s) remains on track to repay the outstanding balance on their mortgage, we may ask your applicant to transfer some or their entire mortgage onto a capital and interest repayment basis.
Please remember it is your applicant's responsibility to ensure they have sufficient funds to repay their outstanding balance at the end of the mortgage term. If they are unable to do so, their home may be repossessed to repay the outstanding balance.
Maturity dates will be requested for each applicable repayment plan

The following are NOT acceptable repayment plans:

Sale of main residence.
Sale of other commercial property.
Sale of non property assets.
Inheritance.
Bonuses.