Coventry lowers interest-only mortgage deposit requirement to 25% of the property value
Tags: Interest-only mortgages
Quick Summary
Coventry Building Society has reduced its minimum deposit requirement for residential interest-only mortgages from 50% to 25%, allowing eligible borrowers to access interest-only lending at 75% loan-to-value (LTV). Coventry has no minimum income requirement, although borrowers must meet affordability assessments and demonstrate an acceptable repayment strategy.
Other leading UK interest-only mortgage lenders include NatWest, Nationwide, HSBC, Halifax, Leeds Building Society and Skipton Building Society.
NatWest offers up to 80% LTV with qualifying investments, while Nationwide provides interest-only mortgages up to 75% LTV and part-and-part mortgages up to 85% LTV, subject to criteria.
Interest-only mortgages can be attractive to higher earners, homeowners with substantial equity and borrowers seeking £1 million-plus mortgages. Monthly payments are generally lower than equivalent capital repayment mortgages, but the outstanding loan must eventually be repaid.
Trinity Financial's mortgage brokers compare interest-only mortgage lenders, deposit requirements, affordability criteria and acceptable repayment strategies to help clients find suitable mortgage options.
Coventry interest-only mortgage brokers in London.
Coventry for Intermediaries has eased its interest-only mortgage acceptance criteria, lowering the deposit requirement from 50% to 25% of the property value.
Coventry has no minimum income requirement for its interest-only mortgages, but applicants must have sufficient income to support an equivalent repayment mortgage and meet repayment affordability checks. The maximum mortgage term is 40 years, and Coventry does not accept new Interest-only applications on a part/part basis. Part/part interest-only is a good option for many borrowers seeking mostly interest-only mortgages.
For all new Interest-only applications, there must be a minimum of £200,000 equity for properties in all regions outside London and the South East, and £300,000 equity for properties in the Office for National Statistics administrative regions of London and the South East, remaining at completion of the mortgage regardless of the applicant's chosen repayment plan.
Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said: “We’re continuing to look for ways to give brokers more options when supporting their clients’ homeownership and property goals. By broadening our interest-only criteria, we’re making this option available to a wider range of suitable borrowers.
"These latest changes build on a number of enhancements we’ve made in recent months, all designed to help brokers find the right solutions for their clients.”
Which other mortgage lenders have good interest-only policies?
Coventry Building Society is not the only mortgage lender offering more flexible interest-only borrowing. Several major UK banks and building societies allow eligible borrowers to take out interest-only mortgages with a 25% deposit, while some offer higher loan-to-value limits or flexible options for borrowers with investments, pensions and other properties.
Interest-only mortgages can be particularly attractive to higher earners, homeowners with substantial equity, borrowers arranging £1 million-plus mortgages and clients who want to keep their monthly mortgage payments lower.
Decent interest-only mortgage lenders compared
|
Mortgage lender |
Interest-only policy (loan-to-value) |
Key advantage and basic acceptance rules |
|---|---|---|
|
Coventry Building Society |
Up to 75% loan-to-value. |
Accepts sale of property and other eligible repayment strategies. All applicants must be aged 18 or over, and no more than 75 years old at the end of the mortgage term. Applicants must have sufficient income to support an equivalent repayment mortgage and meet Coventry's repayment affordability checks. Maximum 75% loan-to-value (subject to product availability). |
|
NatWest Nationwide for Intermediaries |
Up to 85% LTV with eligible investments; 75% using sale of main residence. |
Particularly flexible for borrowers with investments. Allows part-and-part. The minimum qualifying income is £75,000 for single applicants and £100,000 for joint applications. |
|
Nationwide for Intermediaries |
Up to 75% interest-only; 85% part-and-part. |
Mortgages up to £5 million and a wide range of repayment plans. Maximum term 40 years, or retirement if sooner (maximum age 70). Minimum income criteria £75,000 for sole applicants, £100,000 for joint applicants (unless one applicant earns £75,000). Nationwide bases minimum income on primary basic income only. |
|
HSBC for Intermediaries |
Up to 75% LTV, subject to loan size. |
Attractive for higher earners with savings or investments. Single applicants requesting a residential interest-only mortgage will be required to have an annual minimum income of £75,000, which must meet the income eligibility criteria. For joint applications, at least one applicant must have an annual minimum income of £75,000. Where a part and part (split repayment) mortgage includes an Interest only component, at least one applicant must meet a minimum income requirement of £75,000. Max term 25 years. |
|
Halifax for Intermediaries |
Up to 75% LTV. For part interest-only/ part capital and interest repayment, lending is available up to 85% LTV, provided any lending above the interest-only limit is on a capital and interest repayment basis. |
The maximum LTV for interest-only lending is 75%. For Sale of Mortgaged Property (SOMP) repayment plans, the maximum interest-only amount may be restricted by the minimum equity requirements. For part interest-only / part capital and interest repayment, lending is available up to 85% LTV, provided any lending above the interest-only limit is on a capital and interest repayment basis. Credit Score Requirement: Customers must achieve a sufficient credit score to proceed. The minimum sole or joint main earned income is £50,000. |
|
Leeds Building Society for Intermediaries |
The maximum LTV for pure interest-only is 60%. If clients require more, the lender can increase this to 75%, provided 15% is placed on a capital and repayment basis. |
Flexible split between repayment and interest-only borrowing. No minimum income required (subject to affordability assessment). Leeds accept a wide range of repayment strategies to suit your client's needs, including the sale of a mortgaged property. |
|
Skipton Building Society for Intermediaries |
Maximum LTV for Interest Only is 70%. Maximum LTV for Part Interest Only and Part Capital & Interest is 80% (Interest Only Part restricted to 70% LTV). |
Useful alternative for borrowers with an acceptable repayment strategy. At least 1 applicant must have a minimum income of £40,000. For joint applications, if this is not possible, a combined minimum income of £60,000 is acceptable. Income must be earned income (this can include rental income but not benefit or maintenance income). The maximum term for Interest Only or Part and Part mortgages is 25 years. |
Source: Trinity Financial and review of lender websites.
Aaron Strutt, Product Director at Trinity Financial, comments: “There are more competitive interest-only mortgage options available than many borrowers realise, particularly for those with larger deposits, substantial property equity or investments.
“The key is understanding which lenders accept different repayment strategies. Some will consider the sale of the mortgaged property, while others want evidence of savings, investments or other assets. Comparing these policies can make a substantial difference to the mortgage options available.”
Interest-only mortgages still need to be paid by the end of the mortgage term. Mortgage lenders typically write to their customers each year to make sure their interest-only repayment vehicle is on track and ensure there is enough money to repay the outstanding balance.
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The information contained within was correct at the time of publication but is subject to change. It is for general information purposes and is not advice.
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