Interest Only Mortgages

New Swansea Building Society customers planning to apply for a mortgage on interest only or part and part basis, terms need to satisfy the following criteria:

• Maximum loan to value (LTV) on interest-only loans is 60%
• Minimum income of £27.5K p.a. (Household)
• A mix of interest-only and repayment is allowed up to the LTV product limit, but the interest-only element must not exceed 75% LTV.
• Maximum of £500,000 on interest only where the mortgaged property is the repayment vehicle and our only security. If a higher amount is required, please contact us to discuss
• Evidence of a credible repayment strategy / suitable repayment vehicle is required for all interest-only or part interest-only residential applications.

An interest only mortgage gives you the ability to pay just the interest charges on your home loan. A capital repayment mortgage enables you to pay the main capital and interest off simultaneously.

The majority of mortgages are capital repayment mortgages.

Interest Only Mortgages

Interest only mortgages, are property loans whereby you only pay the loan's interest. At the end of the mortgage term, you'll need to payback the full mortgage capital amount in full.

There is certainly a greater risk of negative equity than with repayment mortgages. The original mortgage balance will remain exactly the same throughout the mortgage term, causing you to be more exposed to house price changes.

The total amount paid in interest over the full term of interest only mortgages also exceed the interest paid on a repayment mortgage.

Capital Repayment Mortgages

Capital repayment mortgages, generally known as repayment mortgages, mean you pay back both a portion of the mortgage sum and the interest every month, the monthly repayments are calculated to ensure that the mortgage is paid down at the conclusion of the mortgage term.

When you pay back both the capital sum and the interest, your total debt will decrease as time goes by, which means the amount you pay in interest will also start to reduce.

If you are an existing customer and you have any concerns about repaying the remaining balance by the end of the mortgage term, a range of options may be open to you, including:

• Sale of property other than the main residence being occupied by the customer (could include Buy to Let, Holiday Homes, Commercial Property, Land, etc) - Evidence of ownership of properties being considered for this purpose to be supplied to the Society along with details of any existing secured lending against such property.
• Sale of the main residence being occupied by the customer - provided there is a minimum equity of £225,000 remaining after taking the Society’s loan into account if in Wales or the average house price of the area the property is located if in England.   (However, each case will be reviewed on its own merits.)
• Pension lump sum – must be supported by up-to-date information from the Pension provider showing current and anticipated benefits.
• Endowment lump sum - must be supported by up-to-date information from the Endowment provider showing current and anticipated benefits. The Society may require assignment of the Policy.
• ISA’s – must be supported by evidence of current funds invested to repay the mortgage.
• Sale of business – the Society will use its discretion in assessing this as a repayment vehicle.
• Repayment of a director’s loan from a business owned by the borrower – by sight and evaluation of the latest financial statements from the accountant evidencing the existence of the directors’ loan.
• Realisation of other investments, e.g., shares, bonds, etc. As for ISA’s the Society will require up to date evidence of the value of the investments to repay the mortgage
• Summary of Verification of Repayment Strategies

You should review your repayment plan on a regular basis to ensure that it’s on track and you’ll have sufficient funds to repay the mortgage capital at the end of the mortgage term.

• Sales of property– by valuation of the property by a qualified Chartered Surveyor, or a Land Registry search confirming the purchase price paid.
• Pension Lump Sum – by up-to-date documentary evidence supplied by the Pension Provider(s).
• Endowment Lump Sum - by up-to-date documentary evidence supplied by the Endowment Provider(s).
• ISA’s – by current balance verification from the ISA Provider(s).
• Sale of Business – the Society will use its discretion in assessing this as a repayment vehicle.
• Repayment of a Directors’ Loan from a business owned by the borrower - by sight and evaluation of the latest financial statements from the accountant evidencing the existence of the directors’ loan.
• Realisation of other investments – by reference to up-to-date statements from the investment providers.