The lender has formalised its criteria by publishing it – after other lenders enacted a raft of other changes – and acceptable repayment vehicles for residential interest-only deals include investments, savings, pension and sale of property.
Aldermore said that where the repayment vehicle is ‘sale of property,’ applicants must have a minimum of £150k equity available, calculated at point of origination, or have sufficient means of repaying the debt without the need to sell their main residential property.
It said that means to repay the debt without homeowners needing to sell their residential property will need to be evidenced, while reliance on future house price growth or assumed future inheritance is not acceptable.
Charles Haresnape, chief executive of residential mortgages at Aldermore, said: “We recognise that there are situations where people will want to trade down their property later in life.
“The reason why we set an initial £150,000 of equity at the start of a loan is just to make sure that by the time people are ready to sell, there is enough equity so people can physically trade down. We think that if that’s verified, then that’s an acceptable reason to have sale of property as a repayment vehicle.”
Aldermore added that sale of property remains acceptable in buy-to-let applications.
The lender said this is part of its “ongoing credit review process.”
Aldermore’s maximum interest-only Loan to Value (LTV) on residential deals will remain at 80%.
Under the section ‘gift from relatives,’ it said that acceptance of a full gifted deposit in residential first-time buyer applications is subject to satisfactory evidence of twelve months’ worth of continuous rental payments.
Where satisfactory evidence of 12 months rental payments is not supplied, first-time buyers will need to show evidence of a 5% deposit from their own funds, as will all other applicants. All other gifted deposit criteria remains unchanged.
Under the ‘deposits’ section, Aldermore said it will accept capital raising, via either a residential or buy-to-let remortgage, to raise funds for a buy-to-let purchase.
Both transactions are acceptable up to scheme limits, which are currently at 80% LTV.
