Interest Only Mortgages

What is an interest only mortgage?

An interest only mortgage is one where your monthly payments only cover the interest charged on the amount you’ve borrowed.

This means your monthly payments may be less. But, it also means you don't pay off any of the original loan amount.

You’ll need be able to show that you have an acceptable plan to pay off the loan amount at the end of the mortgage term.

Already have a YBS mortgage? Go to interest only for existing customers.

Can I get an interest only mortgage?

You’ll need to

Have an acceptable plan in place to repay the loan at the end of the term. We call this a repayment strategy.

Provide evidence of your repayment strategy during the application process.

Provide this evidence again at least once during the mortgage term.

You can not

Borrow over a maximum of 75% loan to value.

Borrow for debt consolidation.

Borrow for a term that goes beyond your stated retirement age or exceeds your 71st birthday, whichever is sooner. If your income is not needed to make the loan affordable, you may be able to go beyond this age.

Repayment strategies

You’ll need to show that you an acceptable plan to pay off the loan at the end of your mortgage.
We call this plan a repayment strategy.

Repayment strategies we accept	Details for this strategy
Sale of Mortgage Property at the end of term	This can cover up to a maximum of 60% of the value of the property. You can borrow up to 85% loan to value (LTV) on a Capital Repayment basis. But only 75% can be on an Interest Only basis by using an additional repayment strategy. For Interest Only lending 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. For Part Interest Only & Part Repayment lending the minimum equity requirements are calculated at the end of the mortgage term.
Sale of other UK property	You can use a maximum of 75% of the equity in the property as your repayment strategy. The property must be in located in the UK. The property must be in your name only with no other parties named. You'll need to show a copy of the latest mortgage statement if it is mortgaged by another lender.
Pension Lump Sum	For defined contribution schemes and Self Invested Pension Plans (SIPP) A maximum of 60% of your tax-free lump sum, or 15% of your 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 mortgage term must take you beyond the age of 55. And your declared retirement age must be at or before the end of the mortgage. You'll need to show your latest pension statement.
Savings	The current value of the savings must cover 100% of the interest only borrowing. The total can include eligible investments that we refer to below. The savings must have been held for a minimum of 12 months. The savings must be in pounds sterling. You'll need to show your 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 be later than the end of the mortgage term. It must be a UK Policy provided by a regulated firm. You'll need to show your latest endowment policy statement, dated in the last 12 months.
General Investments	The current value of the investments must cover 100% of the interest only element of the mortgage. The total can include savings that meet our terms and conditions and that are referred to above. The investments must be in pounds sterling. The investment must have been in place for a minimum of 12 months. For stocks and shares ISAs, Unit Trusts/OEIC, or for Investment Bonds, you'll need to show your latest statement. For stocks and shares ISAs you may need to show copies of share certificates or statements containing evidence of shareholdings and their valuation.

How to get an interest only mortgage

Get a Decision in Principle (DIP)

Get a Decision in Principle (DIP) to find out how much you could borrow. Choose how to get a DIP below.

You may need a DIP to make an offer on a home.