Understanding the requirements for Interest Only mortgages
Key elements of Interest Only policy are:
1) The maximum loan (including any reserve) allowed on an interest-only basis is 75% LTV. If your client requires borrowing over 75% the additional funds must be taken on a repayment basis i.e. part and part.
2) All clients wishing to apply for an interest only mortgage must have in place a repayment plan for their loan on completion of the advance.
3) The following are acceptable repayment plans for interest only mortgages:
- An endowment policy
- A personal pension policy
- An Individual Savings Account (ISA)
- Certain historic Personal Equity Plans
- Sale of mortgaged property (must have equity of at least £150,000 in the property and the interest only element limited to 66% LTV)
Where an expected rate of return does not appear realistic compared to advertised rates of return for such products, further details may be requested upon submission of a mortgage application to fulfil their audit requirements.
4) If you are considering an application for an Interest Only or Part and Part mortgage please refer to the Interest Only section on their website.
For further, more detailed information on every aspect of Woolwich's lending policy, they strongly advise you visit Woolwich lending policy on their website. Alternatively, you can contact them on 0845 070 1567, Monday to Friday 9am to 5pm and they will be happy to answer any questions you have.