Part Repayment, Part Interest Only Mortgages Explained

What is a part-and-part mortgage?

This home loan combines both interest-only and capital repayment by allowing you to pay just a portion, rather than all, of your mortgage loan back through monthly repayments. That leaves a smaller balance to settle at the term’s end.

The key criteria that lenders will look at when you apply are the following:

• A part-and-part mortgage needs a viable repayment strategy for the interest-only part
• Property value and loan-to-value (LTV) percentage of the interest-only part vs the repayment part
• Income has an impact; there are minimums with some lenders, and high earners can get more flexibility

These are some of the questions you should consider before you apply, as lenders will want to know the answers to them:

• What is the property value and current mortgage?
• How much and what percentage of the loan are you looking to keep as interest-only?
• How do you plan to repay the interest-only portion at the end of the term (investments, assets, etc., sale of the property)?
• How much do you earn (there are often rules around income levels, and higher income earners can access more flexible underwriting and have more options)?

You can get a clearer idea of how these mortgages work and what your repayments could look like if you choose one by trying our calculator below.

The benefits of these mortgages

Half-interest and half-repayment mortgages offer a unique and flexible repayment solution, bringing multiple benefits.

These include:

• The ability to pay less in monthly repayments than in a capital repayment model;
• A reduction in the lump sum that would be paid at the end of an interest-only mortgage;
• Less interest to pay than on an interest-only mortgage as it reduces over time, and
• The opportunity to have a say in the ratio between the two mortgage types.

The drawbacks, as with an interest-only mortgage, are that you do still need a feasible way of paying off that lump sum at the end of the mortgage, and if your repayment vehicle doesn’t work out, you’d need to have another one in place to repay the outstanding debt.

An advisor can work with you to ensure that your plan is solid and that you have backup options available.

How to get a part-and-part mortgage

If you think this is a model you’d like to explore and potentially apply for, these steps will get you off to a good start:

Who qualifies for this type of mortgage?

There are generally specific stipulations when it comes to a part and part mortgage; each lender will still work to their criteria, but what they will all be looking at is:

• Your repayment plan: A lender will want to know how you will pay off the remaining balance for the interest-only element at the end of the term and see evidence of this plan.
• The property type and value: Interest-only is viewed as a riskier arrangement. If a property is non-standard, there’s an additional layer of risk that may affect a lender’s willingness to lend to you on a part-and-part basis. There are some specialist lenders, however, that could be accessed via a broker in this situation.
• The deposit: A higher deposit reduces lenders’ risk. The maximum loan-to-value (LTV) most lenders will accept in a part-and-part situation is 85%, so anything lower than that will work in your favour.

As with any mortgage application, the crux of the assessment lies in whether you can feasibly repay what you’re asking to borrow. You’ll also need to submit information on your income and outgoings, any existing debt, and credit.

Who offers part-and-part mortgages?

Part-and-part mortgages have a slightly higher risk level than conventional mortgages, which means that the market for them is narrower, but it does exist.

These types of home loans are available, subject to availability, with some high street lenders, including:

• Skipton Building Society
• Halifax
• Barclays
• Leeds Building Society

What a quick Google search won’t pull up, though, is the number of specialist part-and-part mortgage lenders out there. Working via a mortgage broker, there is more of a chance to negotiate with such lenders, and, as specialists, they sometimes offer better rates, viewing the situation as less risky than a mainstream lender might.

Regardless of which lender you feel is right for you, approaching it directly puts you at risk of rejection. Working through a broker will speed up the process of finding the best deal while allowing an expert to thoroughly review the rates, ratios, and terms being offered.

Get matched with a part-and-part mortgage specialist

This hybrid model involves a few more calculations and requires a watertight repayment plan. Working with an advisor ensures you’re applying to the best lender for the best part-and-part mortgage for you.

Our advisors have access to the entire lending market and can compare part-and-part mortgages, determining the best rates available at the time of application.

You can enjoy a free, no-obligation consultation by calling 0330 818 7026 or filling out an enquiry form.