Interest Only

All mortgages have one thing in common – interest is charged on the amount you borrow. Depending on your circumstances, we could help you decide if an Interest Only mortgage might be right for you.

What is an Interest Only mortgage?

With an Interest Only mortgage, your monthly mortgage payments only cover the interest and don’t go towards repaying the original amount borrowed. That means:

• Your monthly mortgage repayments will be lower
• The capital element of your mortgage loan won’t reduce over time because it’s not being paid off
• You’ll be required to repay the entire capital balance of your mortgage (together with any fees or charges that may have been added to your loan) in a lump sum at the end of the mortgage term.

It is entirely your responsibility to ensure that at the end of the term the remaining balance on your mortgage is repaid in full by your repayment strategy.

Interest Only mortgages may be suitable for you if you:

• Are looking to borrow a maximum of 70% of the property value
• Are looking for a maximum mortgage term of 25 years
• Have an acceptable repayment strategy in place to repay the capital lump sum at, or before, the end of your mortgage term
• Can provide evidence to support your repayment strategy during the application process
• Are not a first time buyer.

What other types of mortgage are available?

Repayment mortgage

• The monthly mortgage repayment you make covers both the interest changed and a portion of the original amount of money you borrowed.
• Providing you make all payments including any fees or charges when due, the loan will be repaid at the end of the term.
• The maximum term Skipton offers for a repayment mortgage is 40 years.

Part and Part

• This is a combination of both repayment and Interest Only mortgage.
• The maximum term Skipton offers for Part and Part is 25 years.
• The maximum amount you can borrow with a Part and Part mortgage is 80% of the property value.

An example of a Part and Part mortgage

A loan of £50,000 could be made up of £30,000 repayment and £20,000 Interest Only, so there would be a remaining capital balance of £20,000 to repay at the end of your mortgage term.

The calculator above will help you to compare the cost of your mortgage on repayment or Interest Only methods or a combination of the two - Part and Part. This may help you to understand if your repayment strategy will be sufficient to repay the remaining balance off at the end of the mortgage term.

What repayment options are available?

If you are an existing customer and you have any concerns about repaying the remaining balance by the end of the mortgage term, a range of options may be open to you, including:

• Changing the mortgage to a repayment mortgage
• Changing to a Part and Part mortgage
• Extending the term of the mortgage, together with one of the above
• Repaying lump sums to reduce the remaining balance
• Making regular overpayments to reduce the remaining balance gradually. See the Flexible Payments Calculator
• Switching to a new product with lower monthly payments together with any of the above. An illustration of the new product will be provided to you and will be subject to availability and current lending criteria. There may be fees payable for certain products.

Any changes will be subject to the terms and conditions of your existing mortgage including any Early Repayment Charges, if applicable, and our current lending policy. Please refer to your original mortgage offer for details or contact us.

Please call our Mortgage team on 0345 607 9825 to discuss the options which are available to you with Skipton.

Helpful information regarding Interest Only mortgages, including budget calculators, is also available from the MoneyHelper website.