An interest only mortgage is where your monthly payments only cover the interest charged on the amount you borrow and you don't pay off any of the loan amount. In order to pay off the loan amount at the end of the term, you will need to have an acceptable repayment strategy.
Is it suitable for me?
Customers who are new to Yorkshire Building Society and looking to take out a mortgage on interest only must meet the following:
You can borrow up to a maximum of 75% Loan to Value.
Interest only borrowing for debt consolidation is not permitted.
Interest only borrowing is not permitted if the term of your mortgage goes beyond your stated retirement age or age 70, whichever is sooner. The term can only exceed your stated retirement age or age 70, whichever is sooner where income is not required to make the loan affordable.
You must have an acceptable repayment strategy in place to repay the loan at the end of the term.
You must provide evidence of your repayment strategy during the application process.
You must also provide this evidence again at least once during the mortgage term.
What are the acceptable repayment strategies?
There are a number of acceptable repayment strategies that can be used to support an interest only mortgage. Please see the table below for further details.
Acceptable Repayment Strategy
Sale of Mortgage Property at the end of term
This can be used to cover up to a maximum of 50% of the value of the property.
Total borrowing can go to 75% LTV by using an additional repayment strategy or borrowing on a Capital Repayment basis
The property must have a minimum equity of £200,000 at the time of application
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.
Latest savings statement.
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.
Latest endowment policy statement, dated in the last 12 months.
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
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.
How do I apply?
If you want to apply for an interest only mortgage, you will need to speak with one of our mortgage advisors by telephone.
Alternatives to interest only mortgages
Link your mortgage repayments to the Bank of England’s base rate. The interest rate on a tracker mortgage changes with the Bank of England base rate, which means your payments could rise and fall.