From today, the lender will accept bonuses as a repayment vehicle. A maximum of 30% of the bonus will be accepted for both sole and joint mortgage holders. If the bonus is selected as a repayment vehicle it will not be included in the affordability calculations.
Cash will also be accepted as a repayment vehicle, so long as it has been held in a savings or current account for a minimum of three months. A minimum of £50,000 is required.
Scottish Widows has also adapted the terms for repayment vehicles that it already accepted.
For example, if borrowers are looking to use their pension, then the projected total fund value rather than current figures will be accepted. The projection must be a minimum of £400,000 of which 15% will be used for interest-only.
And for final salary pensions where no projected value is provided, the tax-free lump sum must be a minimum of £100,000, of which 60% will be used for interest-only.
Last year Scottish Widows introduced the ‘sale of mortgaged property’ repayment vehicle for interest-only borrowers, with a maximum loan-to-value of 50% (other repayment vehicles can be used to borrow up to 75% LTV). It also requires that there is at least £200,000 equity in the property.
Martin Fleming, managing director of Scottish Widows Bank, said that since the introduction of the sale of the mortgaged property as a repayment vehicle last year, the lender had seen strong growth in its business.
He continued: “We regularly review our products and policies to reflect the needs of our target customers, and expanding the repayment options today will further improve our interest only proposition. A flexible interest only policy together with offset on all our products helps our customers to manage change and save money over the long term.”