Part and part mortgages explained
Warning: THE MORTGAGED PROPERTY (WHICH MAY BE YOUR HOME) MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
What is a part and part mortgage?
If you have a part and part mortgage, you pay off some of your mortgage as you go, but not all of it. When the mortgage comes to an end, there will still be some money left to pay off.
Part and part mortgages are a middle-ground between repayment mortgages and interest only mortgages.
A part and part mortgage is also known as a “part repayment and part interest mortgage”, or a “part capital and part interest mortgage”.
What are the benefits of a part and part mortgage?
Part and part mortgages are ideal if you want to have lower monthly payments than a repayment mortgage, but less capital to pay off at the end of the mortgage term than an interest only mortgage.
For example, you might have investments that can pay off some of your mortgage, but not all of it.
Really, it’s only in particular situations that part and part mortgages are ideal. That's possibly why they’re the least common type of mortgage.
How does a part and part mortgage work?
There’s no one way that all part and part mortgages work. How much capital you pay off as you go and how much you pay off at the end can be discussed with your lender, and tailored to your specific needs.
That said, most lenders have maximum amounts that can be interest only. And this is usually tied to the loan-to-value ratio of your mortgage, or LTV.
So, although the particulars of a part and part mortgage tend to be flexible and negotiable, you will need to pay back a decent chunk of your mortgage on a repayment basis.
Paying back the interest only part
When you take out a part and part mortgage, you have to prove to your lender that you will be able to pay back the money leftover at the end. Just like if you took out an interest only mortgage.
That means you have to have a plan. Or a "repayment strategy", to use the official term. And you can expect to be asked a lot of questions about that plan, and how you're going to make it work.
Switching to a repayment mortgage
If your circumstances change, and you decide that you’d rather have higher monthly repayments in order to pay off more of your mortgage, most lenders will let you switch to a repayment mortgage at any time.
Bear in mind though that switching to a repayment mortgage will mean higher monthly repayments than if you had a repayment mortgage from the start, because you have to pay it all back over a shorter period of time.
You usually won’t, however, be able to switch to a fully interest only mortgage midway through a part and part one.
Interested in a part and part mortgage?
This guide is intended as a summary only and does not constitute financial or legal advice given by Leeds Building Society. No reliance should be placed on this guide. We recommend that you seek independent financial/legal advice if you have any questions or queries.