In the past, interest-only mortgages were popular and widely available.
The Financial Conduct Authority reviewed mortgage lending in the UK. This resulted in the introduction of the Mortgage Market Review (MMR) in April 2014 with new recommended guidelines and stricter affordability.
One of the causalities of the MMR was almost the death of the interest only mortgages. However, since 2014 there has been an increasing number of lenders coming back to the marketplace who offer interest only mortgage but with demanding criteria.
The good news is that Post Office Mortgages have just launched new interest-only lending criteria.
The major benefit of the Post Office is that they will accept a combination of repayment vehicles rather than expecting just one to cover the entire borrowing.
The 4 factors affecting your ability to obtain an interest only mortgage are:
- Minimum incomes
- Maximum loan to value
- Minimum loan amount
- Acceptable repayment vehicles
Below is the current Post Office criteria
Minimum Income:
- £50,000 per annum for a single applicant.
- £75,000 per annum for joint income
Loan-to-Value:
- 75% is the maximum LTV.
- E.g. if the property is valued at £300,000 the maximum advance on interest only will be £225,00.
Any borrowing over 75% must be on a capital repayment basis. This means you can borrow up to 90% with 15% on a repayment basis and 75% on interest only.
Minimum Loan Amount:
- £25,001
Property Value:
- Minimum property value is £33,335 in order to fit the maximum loan-to-value criteria.
Acceptable Repayment Vehicles
The major benefit of the Post Office is that they will accept a combination of repayment vehicles rather than expecting just one to cover the entire borrowing.
The following repayment vehicles are acceptable:
1. Sale of Another UK Property Including Buy-To-Let Properties
Post Office will accept 80% of the equity.
E.g. Property valued at £250,000 with a current mortgage of £100,000.
This can be used to support interest-only borrowing of £120,000.
2. Tax-Free Lump Sum From Private or Company Pension Scheme
Projected valuation
Been a member for more than 12 months
3. Equity ISAs and Unit Trusts
Current valuation plus the value of annualised future contributions
Been in place for 12 months
Endowment policy
Projected valuation
Been in place for 12 months
4. Investment Bonds
Current valuation
Contact us to discuss your individual circumstances
Why Use Neil Soundy Financial Services For Your Mortgage Advice?
- We are experts in SPV / Ltd Co lending.
- Your initial consultation is free with no obligation
How Much Will It Cost Me For Your Advice?
A fee of £495 is payable on completion of the mortgage and Neil Soundy Financial Services Ltd will keep the commission received from the lender for arranging the mortgage.
Neil Soundy Financial Services Ltd is an appointed representative of HL Partnership Ltd which is authorised and regulated by the Financial Services Authority.
We do not give or imply legal or taxation advice. We recommend you contact a solicitor or accountant for advice in these areas
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
