Scottish Widows adds interest-only repayment options

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Scottish Widows Bank has added more repayment options to some interest-only mortgages.

From today the lender will accept bonuses and cash as repayment strategies.

Scottish Widows Bank managing director Martin Fleming says: “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 (including our five-year fixed rate) helps our customers to manage change and save money over the long term.”

If a bonus is selected as a repayment vehicle, this will not be included in the affordability calculation.

Scottish Widows will accept a maximum of 30 per cent of a gross annual bonus for sole applicants or 30 per cent of combined gross annual bonuses for joint applicants.

The maximum age will be the lower of anticipated retirement age or maximum working age, plus 11 months. This will allow for bonuses to be paid after retirement.

Minimum income levels apply.

For cash repayment, the money must have been held in a savings or current account for a minimum of three months.

A minimum of £50,000 is required, and can be held over several accounts.

Scottish Widows Bank has also tweaked its existing pension repayment vehicle.

Projected total fund value rather than current figures will be accepted.

Projection must be a minimum of £400,000, of which 15 per cent will be used for interest-only.

For final salary pensions where no projected fund is provided, the tax free lump sum must be a minimum of £100,000 of which 60 per cent will be used for interest-only.

Customers can now use multiple pension funds, as long as each fund meets minimum requirements.

The maximum age accepted is the lower of anticipated retirement age or maximum working age.

Minimum income levels apply to all the new changes. No such requirements apply to the altered pension repayment vehicle option.