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Interest Only Mortgages

Do you want to use your pension or other investments to help repay your mortgage and keep your monthly costs low? An interest only mortgage may be the answer to your needs.
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A mortgage where only the interest is required to be paid each month, as long as the remaining balance is paid by the term of the agreement.

An interest only mortgage allows you to take ownership of a property while only repaying the interest. Monthly repayments will therefore be lower as no capital is paid off, but the debt owed against the property will not reduce and you will pay more interest over the total term of the mortgage than if you had selected a capital repayment mortgage.

You can use savings, investments or other assets known as a ‘repayment strategy’ to pay off the total amount you have borrowed at the end of the mortgage term.

At Aldermore we will consider interest only applications for up to 75% of a property’s value across our product range for owner occupiers, and 80% for most Buy to Let properties. To apply for an interest only mortgage you must have a suitable repayment strategy in place so you can pay off the outstanding mortgage balance at the end of the term.

At Aldermore, we have a team of expert mortgage advisers who will guide you through your application process for an interest only mortgage, and expert underwriters who take a common sense approach to your personal circumstances and will assess each application individually. If you would like to make an application for an interest only mortgage please give our team of advisers a call today on 0333 920 6009.

Please note you are responsible for putting in place and maintaining your repayment strategy to pay the original loan, and to regularly review its performance to your expectations.

Acceptable repayment strategies:

  • ISAs or other savings – up to 100% of the current balance can be used to pay off the capital of your mortgage.
  • Stocks and shares or other investments - Stocks and shares or other investments – up to 100% of the current value can be used.
  • Endowment policy - up to 100% of the latest maturity value can be used. We base this on the medium growth rate or the lower rate (when two rates are quoted). However, you should regularly check that your endowment policy remains on track to repay the mortgage capital and we recommend that you take regular independent financial advice.
  • Pensions - this can be a personal, executive or employment pension plan. We will use up to 75% of the latest projected tax-free lump sum, based on the medium growth rate or the lower rate (when two rates are quoted). However it is advisable for you to assess that your pension plan will be sufficient to repay the mortgage capital and we recommend that you take regular independent financial advice.
  • Downsizing or selling your home - where the sale of your main residence is to be used as the repayment strategy, you will be expected to have a minimum amount available to purchase a reasonable sized property at the end of the mortgage term of between £150,000 and £250,000 (for properties in London and the south east of England).
  • Sale of another UK based property - if the property is mortgaged, up to 100% of the current available equity can be used. If the property is not mortgaged, up to 100% of the current market value can be used.

Other repayment strategies, including the sale of other assets and occasional payments from income will be considered, provided that you can show evidence of these. These must not be held or received in a foreign currency.  Your mortgage adviser and our underwriters will fully assess your ability to repay the capital at the end of the mortgage term.

Please note there could be a risk of a shortfall at the end of the mortgage term, which means that your investment may not deliver enough to repay the mortgage amount. We recommend that you take independent financial advice to find out which is the most suitable investment strategy for you.


YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Repayment Vehicles

  • ISAs or other savings – up to 100% of the current balance can be used to pay off the capital of your mortgage.
  • Stocks and shares or other investments – up to 100% of the current value can be used.
  • Endowment policy – up to 100% of the latest maturity value can be used. We base this on the medium growth rate or the lower rate. However, it is advisable for you to assess that your endowment policy remains on track to repay the mortgage capital and we recommend that you take regular independent financial advice.
  • Pension – this can be a personal, executive or employment pension plan. We will use up to 75% of the latest maturity value, based on the medium grown rate or the lower rate. However it is advisable for you to assess that your pension plan will be sufficient to repay the mortgage capital and we recommend that you take regular independent financial advice.
  • Downsizing – where the sale of your main residence is to be used as the repayment vehicle, you will be expected to have a minimum amount available to purchase a reasonable sized property at the end of the mortgage term of between £150,000 and £250,000 (for properties in the south east of England).          
  • Sale of another property – if the property is mortgaged, up to 100% of the current available equity can be used. If the property is not mortgaged, up to 100% of the current market value can be used.  

 

Other repayment plans, including the sale of other assets and occasional payments from income will be considered, provided that you can show evidence of these. Your mortgage adviser and our underwriters will fully assess your ability to repay the capital at the end of the mortgage term.

Please note: there could be a risk of a shortfall at the end of the mortgage term, which means that if your investment doesn't deliver enough to repay the mortgage amount. We recommend that you take independent financial advice to find out which is the most suitable investment plan for you.

Free independent advice

If you’re concerned about how future interest rates changes could impact you and your ability to pay your mortgage payments, there is help available. It is advisable to speak to your lender at the earliest possible stage if you are facing financial difficulties. Aldermore’s team are here to support and help you during difficult times. Please call 01733 821 388 to speak to our team. You can also contact the organisations below for independent and confidential advice:

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