The changes aim to enhance the range of repayment plans that the lender will consider in support of an interest-only mortgage, product transfer or further advance.
Three new repayment plan types will be introduced – bonus, cash and sale of mortgaged property – available to customers who meet a minimum income requirement.
Changes to the existing requirements for pension have also been introduced which will now include the acceptance of a projected total fund value or lump sum rather than a current value. There is no minimum income requirement to use this as a repayment plan.
There must be a minimum of £400,000 projected total pension fund value of which a maximum of 15% can be used as a repayment plan. If the statement does not include a total fund value, then up to 60% of a projected lump sum (min £100,000) may be used.
Ian Wilson, head of Halifax Intermediaries, said: “Listening to feedback and translating it into real ways to help brokers business is fundamental to our longstanding support of the market.
“Making sensible changes to our existing policies including how pensions are treated as well as bringing in new options not only demonstrates our ongoing commitment to intermediaries, but provides greater access for borrowers who can benefit from interest-only products where they may be a more suitable option.”
To use these new repayment plans a sole applicant must have a minimum income of £100,000. For a joint application, one applicant must have a minimum income of £100,000 or the combined income of applicants one and two must total a minimum of £150,000.
There are no changes to the criteria or requirements for other existing repayment plan types.
Summary of changes:
Bonus
• 30% of the annual bonus amount will be multiplied by the mortgage term to give an amount of interest-only cover available.
• If a bonus is used as a repayment plan it will not be included within the affordability calculation.
Cash savings
• The full balance can be used for interest only where the applicant can evidence the amount has been held for at least three months before the date of the application and a minimum £50,000 is to be used.
• The applicant cannot use the same cash for both the purchase deposit/costs and as a repayment plan.
Sale of mortgaged property
• Acceptable as a repayment plan for main residence at maximum loan of 50% loan-to-value (LTV) on interest only (borrowing above this, up to 75% LTV, would be available on a capital and interest basis).
• The property must have a minimum equity amount of £200,000 to qualify.
• If the application is for a second home loan the appropriate scheme must be selected and the maximum LTV for interest only is 75% (the above restrictions on equity do not apply).
