With an interest only mortgage you will only make payments towards the interest on the capital you've borrowed, not the outstanding balance. This means that you will still owe the full amount borrowed on an interest only basis at the end of the mortgage term. You will need to make separate arrangements to repay this.
It is your responsibility to ensure that you have sufficient funds to repay the amount borrowed on an interest only basis at the end of the term. This could be an investment, such as an endowment, pension or ISA, or a combination of these. Whichever option you choose, you should review your plans regularly to make sure you are on track to pay off the mortgage on or before the end of the mortgage term and make changes if necessary.
The Society cannot advise you on the suitability of any particular repayment method. If you have any questions about whether an interest only mortgage is appropriate for your needs or if you have any questions regarding the suitability of a repayment plan, you should speak to an independent financial advisor.
No life cover or critical illness cover is included with this type of mortgage and we would strongly advise you to protect your family home by making sure you've enough life cover and critical illness cover to pay off your mortgage in the event of your death, or if you were unable to work due to accident or sickness.
If you choose to borrow all or part of the loan amount on interest only terms, a maximum f 50% loan to value applies. This means we will only lend you up to half the value of the property. If you intend to repay your mortgage in full at the end of the term through the sale of the property, then you must hold a minimum of £150,000 equity in the property at the point of application.