Halifax, one of Britain’s biggest lenders, has recently relaxed
the criteria borrowers are required to meet if they want an interest-only
With this type of mortgage, as the name suggests, you only
repay the interest on the amount you’ve borrowed each month. The capital must
be repaid when the mortgage term ends.
Homeowners used to need a minimum £1million pension pot to
be eligible for an interest-only mortgage with Halifax.
Now they only need to prove they have a pension which will
reach £400,000 by the time they retire.
They can also sell their home as a means of paying back what
they owe. To be eligible, however, homeowners must have an income of £100,000
or more, or £150,000 if applying as a couple. They must also have at least
£200,000 equity in the property.
Interest-only deals were very popular prior to the credit
crunch, but lenders have since made it harder to qualify for this type of loan.
Most lenders do still offer interest-only mortgages, but may
impose eligibility requirements. For example, Virgin Money will lend on an
interest-only basis to borrowers with a joint income of £50,000, while NatWest requires
a minimum income of £100,000.
Changes such as those made by Halifax show that lenders are
re-assessing their approach to interest-only, although borrowers will still
need to demonstrate a repayment plan to ensure it’s appropriate.