According to Statista, mortgage lending in the UK in 2024 is forecast to be worth around £247 billion, with house purchases making up the largest share at around £122 billion.
This means that billions of pounds are processed through multiple mortgage types, with various options available. Which mortgage type is right for you?
You’ve heard about repayment mortgages, and you’ve heard about interest-only mortgages, but have you heard about part-and-part mortgages?
You’ve probably already guessed it; this type of mortgage combines the two.
Defining a Part-and-Part Mortgage UK
Part and part mortgages split the repayment of the mortgage between capital and interest.
It’s essentially a repayment mortgage that pays down capital only and an interest only mortgage that focuses on paying down just the interest.
Essentially, with a part and part mortgage, you will be chipping away at both the outstanding debt and interest.
Advantages of Part and Part Mortgages
Some of the benefits of part and part mortgages in the UK include:
- The monthly repayments tend to be slightly lower than other types of mortgages
- Often, part and part mortgages are more flexible
- You’ll pay off both interest and capital debt at the same time
- Borrowers need less money to purchase the property outright when the mortgage term comes to an end
- Interest amounts reduce as the mortgage is paid down and the outstanding amount reduces
Disadvantages of Part and Part Mortgages
- Some lenders consider part and part mortgages to be riskier than other mortgage types
- Not all lenders offer this type of mortgage
- The repayment schedule can be complicated and you may need to consult with a professional who can provide you with guidance and advice
How Part and Part Mortgages Work
When you apply for a part and part mortgage, you’re actually asking the lender to divide your mortgage into two parts.
The first part is the repayment, and the second part is the interest.
Mortgage providers won’t stipulate what percentage of your monthly instalments go to each part – this is a decision for the borrower.
Of course, some lenders will stipulate what they would prefer in your lender’s agreement.
In most instances, lenders prefer borrowers to pay more towards their repayment than their interest amount.
Applying for a Part Interest Part Repayment Mortgage in the UK
In most instances, the application for a part interest part repayment mortgage is the same as any other mortgage application.
The process involves meeting the lender requirements and ensuring that you have a deposit available, earn enough income, and submit to a credit check.
Mortgage providers will generally put together a finance arrangement that they feel will suit your financial situation.
Most providers will focus the mortgage payments mostly on the repayment portion (paying down the capital debt) with a small focus on the interest part.
And the end of your mortgage term, you will have some interest and some capital debt to pay.
The lender will want a detailed explanation of how you plan to pay this amount.
The more detailed you are with this information, the more likely you are to get approved.
Accepted Forms of Repayment Vehicles
Commonly acceptable repayment vehicles considered suitable by most mortgage lenders in the UK include:
- Sale of another property
- Sale of current property
- Stocks and shares ISA or equity investments
- Self-invested personal pension or a private pension
- Bonds or gilts
- Endowment policies
Can You Remortgage Mid-Term with a Part and Part Mortgage UK?
Mortgages span many years of life, so it stands to reason that, at some point, financial situations may change.
You may find that your income changes during the mortgage or your repayment strategy no longer seems well-suited.
You may even want to settle your mortgage earlier. In such instances, you can remortgage your part and part mortgage mid-term.
When this happens, the borrower often wishes to switch to a repayment mortgage.
If you do switch, you can pay more into your mortgage and have nothing to pay over at the end of the term if you haven’t missed payments.
What to Do if Your Income Reduces
If your finances change and you can no longer afford your current mortgage payments, you may struggle to qualify for a remortgage.
Every time you switch to a different mortgage deal, the provider will assess affordability.
If your finances are under pressure, you may find that the lender determines the loan is ill-affordable.
In such instances where finances change for the worse, it’s best to consult with a mortgage advisor first before taking any action.
Requirements/Criteria to Apply for a Part and Part Mortgage in the UK
To apply for a part repayment part interest mortgage, you will need to meet these requirements:
- 18+ years old
- Valid ID
- UK citizen or resident (legally)
- Have at least a 15% deposit available
- Earn between £75,000 and £100,000 per annum
- Good credit score (although, there may be some poor credit score options available)
- Proof of your payment vehicle
Alternative Options to Part and Part Mortgages
Sadly, not all applicants in the UK will qualify for part-and-part mortgages.
If this is the case, other mortgage options are available, and it might be worth considering:
- Interest-only mortgages: these are suited to those who want a lower monthly instalment.
- Full repayment mortgages: if you don’t have a repayment vehicle but can afford to pay fairly high monthly instalments, this is a viable option.
- Joint mortgages: dividing the cost of a property with one other, or a group of people, can ease the financial burden and help you qualify for a higher mortgage amount.
Consult with a Mortgage Broker or Advisor
In the UK, mortgages can become complicated, especially if unfamiliar with the processes and requirements.
If you’re interested in applying for a part-interest, part-repayment mortgage in the UK, consulting with a mortgage advisor or broker is a step in the right direction.
They can advise you on your options and requirements and guide you through the process.
Call us today on 01925 906 210 or contact us to speak to one of our friendly advisors.
