Changes to the Interest Only Lending Criteria

Interest Only

• Where an investment based vehicle is / will be in place, the type of vehicle (e.g. endowment, investment lump sum) and estimated value of the vehicle must be recorded on the application form.
  
  
• The estimated value of the vehicle must equate to at least 100% of the loan amount. In the event of this not being the case, the loan, or shortfall element must be advanced on either a capital and interest basis, or the shortfall made up by means of increasing the deposit required.
  
  
• The criteria applies to both primary and additional lending, in the instance of shared ownership / shared equity application the LTV should be calculated using the customers share, rather than the property value, in line with the existing approach to other criteria (income multiples).

Where an investment based repayment vehicle is / will be in place (for the full amount of the proposed loan) the maximum loan to value is derived from the product criteria. Applicants are made aware in the offer of advance and on their annual statements to ensure that adequate arrangements are in place to repay the loan amount at the end of the mortgage term and that investment vehicles are not assigned to the Society.

Higher Risk Repayment Strategies

The Society regards the following (non-investment based) repayment strategies as higher risk, and a maximum loan to value of 75% applies in these cases:

• Inheritance;
• Sale of property

The change to criteria will take effect from Monday 1st February, pipeline cases will be accepted under the old criteria providing the full application is received by MLD on Friday 5th February.  Details of the change are given in section 18 of the Residential Lending Guide.

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