A-Z Lending Criteria Guide

Interest Only is acceptable for mortgages and remortgages (except first time buyers)

Maximum LTV

• 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)
• Applications over 80% LTV must be taken on a Capital & Interest basis.

Minimum Income

• 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 above applies where the repayment method contains any element of Interest Only.

Max Terms

• The maximum term for Interest Only or Part and Part mortgages is 25 years.

First Time Buyers are not eligible for an Interest Only mortgage with Skipton Building Society. First Time Buyers must take their mortgage on a Capital & Interest repayment basis.

Acceptable Repayment Strategies

The Society will only enter into a regulated mortgage contract, where all or part of that contract is on interest-only basis if the customer can provide evidence that a clearly understood and credible repayment strategy is in place and as far as it is reasonably able to assess at the time of underwriting, the repayment strategy has the potential to repay the capital borrowed and that this will be in £Sterling (IOM£ / Gibraltar£ also acceptable).

Acceptable Repayment Strategies are:

The latest annual statement must be provided as evidence that the sum due to be paid on maturity based on the “medium” projection is equal to or in excess of the proposed amount of mortgage borrowing. The policy is not deposited with or assigned to the Society

Evidence must confirm that the value of the assets at the time of underwriting is equal to or in excess of the proposed amount of mortgage borrowing.

Acceptable assets are:

• Equity in a UK property. Where the main residence is being used as the repayment vehicle the maximum LTV for the interest only element is 50% and a minimum of £300,000 of equity must be remaining in the property after the total advance. Where the overall loan is above 50% LTV, additional repayment vehicles can be used in conjunction with Sale of Mortgaged Property. If including equity from any BTLs, holiday lets, and second homes the property must be owned in the applicants name only
• Pension – 25% of the projected pension pot can be used as a repayment vehicle, subject to minimum projected pot value of £600k or a minimum current pot of £300k. Pension cannot be used as an acceptable repayment vehicle if the pension is being used as income on the application. When using figures from pension projections, the mid pension pot projection should be used
• UK shares and bonds held as investments (including Sharesave schemes and Premium Bonds)
• Cash savings in a UK deposit account. Any savings used must be personal and not business related

Unacceptable Repayment Strategies

The following repayment strategies are unacceptable for new lending:

• Lump Sum repayment
• Expected inheritance
• Bonus income
• Regular overpayments
• Equity in a commercial property
• BTLs owned in a company name
• Business related savings
• Second home where a dependent relative resides – If on an Interest Only basis the non-proprietor’s main residence cannot be the repayment vehicle
• Joint Borrower Sole Proprietor (JBSP) Cases - If on an Interest Only basis the non-proprietor’s residence cannot be the repayment vehicle
• Where the asset is held in or is coming from a foreign country/source (assets from IOM£ and Gibraltar£ are acceptable)