12 May 2021
Repayment Strategy – Endowment policy(ies)
With an endowment policy repayment strategy, interest only is paid to the Society and a monthly premium paid to an insurance company for the policy which pays a lump sum at the end of the mortgage term or on death if earlier. The lump sum is used to repay the mortgage. The lump sum at the end of the mortgage term is not guaranteed and may not be enough to repay the mortgage. The life cover or the lump sum payable on death is usually linked to the amount of the mortgage loan. The policy can be written in joint or single names. Repayment strategies cannot be accepted if they include the name of anyone not named on the mortgage.
The Society will require a copy of the latest projection statement dated within the last 12 months. The Society will allow up to 100% of the middle growth projected outcome.
The Society is unable to offer any advice on the suitability of any protection or investment products.
Repayment Strategy – Stocks & Shares ISA
With a Stock & Shares ISA (individual savings account) repayment strategy, interest only is paid to the Society.
ISA plans can be funded on a monthly basis. The capital built up in the plan is used to repay the mortgage at the end of the mortgage term. There is no element of life cover with this method and the borrower must make separate arrangements to cover the mortgage in the event of death or critical illness. There is no guarantee that the plan will produce enough to repay the mortgage.
For Stocks and Shares ISA the Society will require a copy of the latest statement dated within the last 12 months. The method of determining the level of investment required at the outset of the loan is :
Loan amount x 120%
Term of loan (in years)
The Society is unable to offer any advice on the suitability of any protection or investment products.
Repayment Strategy – Pension
A pension repayment strategy is based on a personal pension plan and is designed to provide the borrower with a pension and pay off the mortgage capital. With this mortgage interest only is paid to the Society and a separate premium is paid to a pension provider for the pension plan. The plan will usually include some form of life cover. This type of mortgage requires specialist advice.
For a pension mortgage the Society will require a copy of the latest projection statement dated within the last 12 months along with written confirmation from the borrower(s) pension adviser or financial adviser. This written confirmation must provide the estimated projected value of the pension at the end of the mortgage term, which should at least cover the interest only mortgage amount..
The Society is unable to offer any advice on the suitability of any protection or investment products.
Repayment Strategy – Sale of Second Home
The Society will allow sale of a second home as a repayment strategy provided there is sufficient equity to repay the interest only part of the mortgage.
The Society will require property details, confirmation of ownership and evidence of mortgage debt. For loans less than 10 years equity at inception should be 100%. For loans greater than 10 years equity at inception should be 75%.
Self build applications – sale of existing property and conversion to repayment
The Society will permit self build applications to be set up on an interest only basis until release of the final stage payment when the mortgage will be converted to a repayment basis.