A Guide to Part Interest Part Repayment Mortgages

Deciding which is the best type of mortgage for your circumstances – interest only or capital repayment – can require some in-depth research.

For some people, a mixture of both repayment methods can prove to be the right fit for their circumstances.

This guide will cover everything you need to know about using a part interest, part repayment (part and part) mortgage, how to find lenders offering this type of home loan and where to look for guidance.

What is a part interest, part repayment mortgage?

A part interest only, part repayment mortgage (or ‘part and part mortgage’) is a flexible way for you to pay back the money you’ve borrowed to buy a property.

It means that you’ll only pay the interest on your loan plus an agreed portion of the original amount borrowed each month.

This unique type of home loan gives you the best of both worlds by covering the interest on the loan and paying off a portion of the mortgage at the same time.

However, it does mean that at the end of the loan term, you’ll still owe a sum of money and won’t completely own the property.

Lenders will require that you have a plan in place to be able to pay off the remaining money owed.

This will be in the form of a ‘repayment vehicle’ that has to meet certain criteria and which you’ll need to prove you have access to.

With part and part mortgages, it’s not always arranged as half interest and half repayment for the monthly payments.

There is sometimes the option to adjust the ratio between interest and repayment. So it’s useful to deal with a broker who has existing relationships with lenders if you want to explore this option further.

Before you press ahead, try our calculator below to get a clearer idea about how this type of mortgage works.

What are the advantages and disadvantages?

A part interest, part repayment mortgage isn’t for everyone and comes with some unique advantages and disadvantages:

Advantages

• Flexible way of making mortgage repayments.
• Lower monthly payments compared to a conventional repayment plan.
• Less money needed to buy the property at the end of the term than if you’d arranged an interest-only mortgage.
• Lower interest payments than an interest-only mortgage because the interest is based on a percentage of the decreasing loan amount

Disadvantages

• Some lenders perceive part and part mortgages as higher risk.
• Often there are fewer lenders available than with full repayment mortgages.
• The repayment structure can be more complex, which requires expert advice and guidance.

How a broker can help with your part and part mortgage

Because this type of home loan is very unique to the applicant, using a broker is going to be your best way of speaking to the right lenders when setting up a part interest, part repayment mortgage.

Specialist brokers will know which lenders offer these mortgages and can put you in touch straight away. Doing this is going to save you a lot more time and money than if you were to try and navigate your way alone.

The advisors we work with will not only be able to introduce you to suitable lenders, but they’ll pair you up with the ones offering the best deals for your circumstances.

This tailored service increases your chances of getting a better rate than if you were to attempt to try and discover them for yourself.

Using a broker to find you the best deal also comes with the added benefit of their help and guidance managing your application from start to finish.

Just make an enquiry with us to get started and speak to a broker today.

Lenders offering part and part mortgages

Generally, only a small number of high street lenders and some specialist lenders will offer a part interest-only part repayment mortgage.

This will depend on a whole host of factors such as your personal circumstances and where you’re based (amongst others).

But here are some examples of major lenders that also offer this type of borrowing:

• Halifax
• Nationwide
• Barclays

Speaking to a broker will be your best way of seeing all the options available to you.

Only by accessing the full list of lenders will you be able to make a choice, which best suits your own personal situation.

Eligibility requirements

In order to qualify for a part and part mortgage, your biggest hurdle will be providing evidence of a repayment vehicle (your plan to pay the remaining balance at the end of the term).

Accepted forms of repayment vehicles will vary between lenders. But you’ll need to prove access to money through ownership of assets such as:

• The sale of the property
• Equity investments (or a stocks and shares ISA)
• Bonds or gilts
• Private pension or SIPP (self-invested personal pension)
• Endowment policies
• The sale of another property

You’ll also need a suitable deposit when taking out your mortgage. The deposit amount will impact the total sum you can borrow and the rates you’re offered by lenders.

Typically, a deposit of at least 15% is required, which means a loan-to-value (LTV) of 85%.

Income requirements can be more stringent for these mortgages.

Because part-and-part agreements are considered riskier, some lenders won’t offer you one unless you earn between £75,000 and £100,000 or a minimum equity amount.

The other major consideration will be your credit score. It’s a good idea to download your credit reports before you start this process.

Your broker can then explain your rating to help you make improvements if necessary. This small step can greatly increase your chances of securing the best part interest, part repayment mortgage deal.

Alternatives to these mortgages

Using this type of mortgage isn’t your only option.

Here are some alternatives to consider:

• Interest-only mortgage – if you need lower monthly payments, then exploring a more straightforward interest-only mortgage could be a good substitute.
• Full repayment mortgage – this can be a solid choice if you don’t have access to a repayment vehicle but can afford the higher monthly repayment amounts.
• Joint mortgage – arranging this type of mortgage means you can split the burden of the repayments with other people.

Getting matched with a part and part mortgage expert

Using a part interest-only, part repayment mortgage can be a flexible and affordable way to pay for your property.

But the specialised nature of these mortgages means that your best chance of finding the right lender and organising payments in this format will be by using a broker.

The advisors we work with can match you up with the right lenders and find you the best deals.

They can also walk you through the whole process, advising you on the best course of action at each step.

We offer a free broker-matching service, pairing you with an experienced expert who has a complete understanding of part and part mortgages.

All you need to do is call 0808 189 0463 or make an enquiry and we’ll introduce you to a specialist mortgage broker for free.