• Interest-only mortgages

    Information for new and existing customers.

    What do I need to remember?

    With an interest-only mortgage, your monthly payments only cover the interest on the amount you've borrowed. This means you won't actually be reducing the loan and at the end of the mortgage you'll still owe the amount you borrowed to buy your property.

    For example, as the below table shows, borrowing £200,000 over 25 years with an interest-only mortgage would require a monthly payment of £417 and after the 25 year term you'd still owe £200,000. A repayment mortgage would require a monthly payment of £897 and after the 25 year term the balance remaining would be £0.

       Interest-only basisRepayment basis 
    Total borrowedTerm Example interest rate Monthly payment Amount remaining to pay at the end of the mortgage term Monthly payment Amount remaining to pay at the end of the mortgage term 
    £200,00025 years 2.50% £417 £200,000 £897 £0 
    £200,00015 years 2.50% £417 £200,000 £1,334 £0 
    £100,000 25 years 3.99% £333 £100,000 £527 £0 
    £1,000,000 15 years 3.99% £333 £100,000 £739 £0 

    It is therefore important that you have a plan in place to pay off any interest only mortgage when the term ends, otherwise you could risk losing your home. You might put money into an investment plan or a high-interest savings account, for example. This obviously comes with risks so you'll need to consider:

    • the overall cost of an interest-only mortgage compared to a repayment mortgage
    • whether your investment or savings plan will put you in a position to fully repay the loan at the end of your mortgage from the outset
    • regularly checking your investment or savings to make sure it's growing sufficiently.


    What types of repayment plans are accepted?

    There are a number of ways that you can put money aside to pay off your mortgage at the end of its term. Here are the types of repayment plans we accept and the evidence we'll need to assess them:

    Repayment planEvidence requiredAssessment method
    Endowment Policies (UK) Both with profits and unitised plansCopy of latest projection statement dated within last 12 months. Endowment companies will present three growth rates to a client with the middle one being the most likely projected outcome. We allow up to 100% of projected amount using the middle % figure currently 6%. 
    Stock and Shares ISA (UK) Unit trusts/Open Enabled Investment Companies (UK) Investment Bonds (UK)Copy of latest statements dates within last 12 months. We will compare the value of the ISA/OEIC/Investment Bond with the amount of interest only lending required, taking into account the remaining term of the mortgage and future market volatility. We will take up to 80% of the current value of the investment into account and the current value must be great than £50,000*. 
    Stocks and Shares (UK) Copy of share certificates, nominee account statement or confirmation from a recognised stock broker containing evidence of share holding together with their valuation. Copy of latest statement dated within last 12 months. See Stock and Shares ISA. 
    Pension (UK) Copy of latest statement dated within last 12 months. For the purpose of backing an interest only mortgage, a maximum of 25% of the current fund value with the current value to be greater than £1million*.
    Where customers are on a final salary pension scheme the lump sum can be used if it is greater than £250,000. Pensions can be combined to reach the £250,000 and there is no need for confirmation of the full fund value.
    Sale of Second Home/Buy to Let (UK) Property details and/mortgage statement from the last 12 months.
    Please note:
    You will need to complete a Declaration of Intent form for each property and send it back to us. By sending this form you agree to TSB arranging an Automated Valuation Model (AVM) valuation of the property and to carry out any Land Registry searches where required. We will also require a copy of the latest Statement for any charges held over the property.
    We will check the ownership of the other residential property and assess its value. We will compare the equity available in the property with the amount of interest only lending required.
    We will take up to 80% of the current equity value but the equity available must be greater than £50,000 at point of application*.
    New customers only
    Sales of other Residential property (not yet purchased) (UK)
    Property details, Acting solicitor to confirm intended ownership of the second property, details of any loans to be secured against this property. (Property valuation and land registry search carried out by us if needed). We will confirm the intended ownership of the second property prior to offer of the new mortgage/further advance. Current equity within the property must be over £50,000. We will use 80% of the current equity value of the property to support Interest Only lending. Please note that there is a minimum greater than £50,000 equity requirement for each individual property being used to support Interest Only lending*.


    *If you have an interest only mortgage and are applying for a Further Advance, the minimum repayment vehicle values do not apply.

    As with any investment there is a risk that it will be insufficient to repay your outstanding mortgage at the end of the term and could mean your property needs to be sold to repay the mortgage. We will not provide advice on your investment plan and strongly recommend that you take independent advice.

    Information for existing customers

    How do I let you know the way I'll repay the amount borrowed?

    All you need to do is complete our Declaration of Intent Form (PDF) and provide supporting evidence to let us know your repayment plan. For details of the evidence required please see above. Once complete, send the Declaration of Intent along with photocopies of your most recent statements/projections to:

    TSB Bank plc
    PO Box 2230
    GL3 9ED

    If you think your repayment plan isn't going to cover everything you'll owe at the end of the mortgage term, call 0345 835 3389.

    Or if you've recently changed your repayment plan and need to update us, just follow the same Declaration of Intent process above.

    Keeping on track with your repayment plan

    Staying on top of your finances throughout the life of your mortgage will help  you keep on track or even reach your goal sooner. For example, if you feel like your investment isn't growing as much as it should be then the earlier you address it the better. Or if you come into some unexpected money, you may choose to put it towards paying off some of the capital of your mortgage before the end of its term.

    While it's your responsibility to keep an eye on your repayment plan, we also have a responsibility to ensure we support you in any way we can. That means we might ask you to provide up-to-date evidence of your repayment plan every now and again. And if you're not on target, we could be able to help you find a solution.

    What if I don't have a plan in place?

    Please contact us on 0345 835 3389 as soon as possible so we can discuss the options and help you put a plan in place. Lines are open 8:30am - 7pm Monday to Friday and 8:30am - 1pm on Saturdays.

    These are some of the repayment plan options available:

    • Switching all of your mortgage to repayment basis - this will mean that your monthly payment will increase but your full mortgage will be repaid at the end of the term
    • Switching part of your mortgage to a repayment basis
    • Pay into an investment plan which can be used to pay off the capital at the end of the term
    • Make lump sum overpayments


    Worried your repayment plan isn't sufficient?

    If you have a plan in a place but you don't feel it'll cover the amount owed at the end of your mortgage, please call  0345 835 3389 and we'll be able to go through the options available to  you.

    Worried about paying your mortgage?

    If you're worried about keeping up your mortgage repayments, the best thing to do is speak to us. We can talk through the various options available and we'll try as best we can to resolve the issue.

    Find out more about what you can do if you're facing financial difficulty.

    Where else can I find support?

    From advice on repayment plans to remortgaging, you can get free, unbiased information on interest-only mortgages via the Money Advice Service website .

    Want to speak to someone about your mortgage?
    If you'd like to speak to someone who can review your mortgage, please call 0800 056 1088. Lines are open from 8am - 8pm Monday to Friday and 9am - 4pm on Saturdays.

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