Interest Only Mortgage Questionnaire

Client(s) Name
Date

Mortgage repayment breakdown summary

Capital and interest / £
Investment-backed interest-only / £
Uncovered interest-only / £
Total loan / £

Part 1: Uncovered interest-only mortgage questionnaire

Will the mortgaged property be used as your main residence? /
YesNo
If not the main residence, please describe below how you intend to use the property:
Please explain below, in as much detail as you can, the reason(s) why you wish to arrange part, or all, of this mortgage on an uncovered interest-only basis:
Tick one or more of the options, then give more detail in box:
Plan for repaying uncovered interest-only debt /

risks

/

Tick

Mortgaged property is not main residence, so it can always be sold in absence of any other plan to repay interest-only debt
I / We am / are already retired, and the mortgage debt will be repaid from estate after death
Convert the uncovered interest-only element to repayment when affordable (max timeframe 5 years) / 8, 9, 12, 13
Save up regularly, and use money to pay occasional lump sums to the mortgage account over the next few years / 2, 3, 4
Use bonuses to pay lump sums to reduce the loan amount. / 2, 3, 13
Set monthly payment into mortgage account above interest-only level, to gradually reduce debt / 2, 4
I / We own one or more additional properties, which will be sold to release money to repay debt on main residence / 6, 7
Sell assets (other than property) to release funds to repay the uncovered interest-only debt / 7
I / We expect to inherit enough money to cover the uncovered interest-only debt / 5
Renovate the mortgaged property and sell it on at a profit within the next three years / 11
Sell property and release funds to repay debt by moving to a smaller/cheaper home / 10
Sell property and move overseas within the next five years / 8
Put off decision about how to repay debt until the next house move (or perhaps the one after that) / 1, 8, 9, 12
Use this box to add further detail about the option you’ve ticked, or to explain any other debt repayment plan not included in the table.
Risk factors most relevant to each debt repayment plan listed on the previous page:
Specific Risk Factor(s)
1 / Your mortgage will end up costing you more in the long run. If you have borrowed a high percentage of the value of your home, you are relying on house price inflation to clear the current loan, pay for your moving costs, and leave enough equity to buy another property. You may find that your next home is unaffordable, particularly if you are hoping to move up the housing ladder.
2 / Many lenders impose early repayment charges on their products – including on regular and lump sum overpayments.
3. / If you are counting on putting money into a savings account to use for lump sum repayments, are you sure you’ll be able to afford it and that you’ll have the necessary self-discipline?
4 / You should also consider a flexible mortgage, arranged on a repayment basis, that allows you to vary your monthly payments, or even take payment holidays.
5 / Unless you are the beneficiary of an estate already going through probate, you cannot guarantee how much you will end up inheriting (if anything), or how long it will be before the money becomes available.
6 / It may not be prudent to rely on house price inflation to let you clear any charges on the separate property, PLUS the new mortgage.
7 / The asset might not be readily sellable, or may fall in value. If it is a property, you need to be confident that there will be sufficient equity available to cover the costs of selling (including clearing any mortgage on it), as well as the sum needed to repay the uncovered debt on your main home.
8 / If you don’t get round to doing anything to ensure repayment of the debt at the end of the term, you may find that the lender will force the sale of your property to get its money back. If that happened, you would lose your home and may be forced to rent, or buy somewhere much smaller/cheaper.
9 / The longer you wait to switch to a repayment loan (particularly if you want to keep the term the same) the larger the jump in your monthly repayment is likely to be. If the reason you want interest-only to start with is so you can afford the mortgage, affordability may well continue to be a problem. Your salary, and general financial position, might not improve as quickly as you are hoping it will.
10 / It may not be safe to assume that downsizing (after moving costs) will repay the whole loan. When it comes to the crunch, you may not want to downsize to clear the debt. Downsizing to release funds to boost your income/lifestyle in retirement is one thing, but being forced to do so just to clear your debts is quite another. This is not considered to be sensible financial planning. If you end up downsizing to help repay your mortgage, it is hard to see what you will have really achieved by borrowing so much, apart from living beyond your means for a few years.
11 / Property renovation might not achieve the profits you are hoping for, especially if the work turns out to be more difficult and expensive than expected and/or the property market goes against you. Have you got enough money to cover the renovation costs? Could you afford to switch to repayment later on if your plans go awry?
12 / The longer you leave it before you start repaying the debt, the more expensive the loan will end up being, and the bigger the eventual jump in monthly repayments you’ll need to make. You might find that, because you have not made any inroads into your debt during the early years, this limits your ability to move up the property ladder in future.
13 / Unless you have a written guarantee you are going to receive a bonus and / or salary increase sufficient to make a difference, reliance on this may not be in your interests. How can you be sure the money will become available?
Basis of Recommendation / Tick ONE of the options below
Adviser recommends that I arrange part/all of the mortgage on an uncovered interest-only basis.
Adviser recommends a different repayment method, (to be described in suitability letter) but I wanted to arrange (part of) the loan on an uncovered interest-only basis.
Applicant declarations (tick boxes) / Self / Partner
1 / I understand that my home is at risk if I fail to either keep up repayments during the term of the mortgage or repay the capital amount of the loan at the end.
2 / I confirm that my plan to repay the uncovered interest-only debt is accurately described in this questionnaire
3 / I understand it is myresponsibility to put that plan into effect
4 / The adviser has explained the risk factors that are most relevant in my case (i.e. the risks numbered against my selected “Plan for Repaying uncovered interest-only loan”).
5 / I understand that my adviser recommends capital and repayment as the most suitable arrangement for me. However, I wanted part / all of my mortgage on an uncovered interest-only basis and understand that this may be less suitable.
Name (1st Applicant) / Signature
Date
Name (2nd Applicant) / Signature
Date
Additional notes box (e.g, to explain adviser’s recommendation to use interest-only)

Part 2: Investment-backed interest-only mortgage questionnaire

(NB: For use only in cases where no investment advice is being provided)

Part 2A: Complete When Customer Using Existing Investment To Repay Part/All Of Loan

The value of investments may go down as well and up and you may not get as much at maturity as you expected to clear the debt.

If the arrangement involves you making specified regular payments, you must ensure you keep making these payments.

What type of existing investment(s) do you intend to use? / (Tick ALL that apply)
Endowment policy
Personal pension
Equity ISA/PEP
Other
- If ‘Other’, please describe
Have you provided details of the existing investment(s) being used? / YesNo
If ‘Yes’, record details of existing investment(s) being used to repay the loan
Type of contract / Sum assured or min death benefit / Lives assured or policyholder / Policy number / Maturity date / Projected value at end term (state assumed % growth rate)
£
£
£
How much of the mortgage do you wish to cover using the existing investments? / £
Applicant declarations (tick boxes) / Self / Partner
I understand that I have not been provided with investment advice about whether to rely on my existing investments to repay my mortgage debt
I understand that it’s my responsibility to monitor the progress of my investment(s) to make sure they will fully cover the amount of mortgage debt I intend them to repay.
I understand that my home is at risk if I fail to either keep up repayments during the term of the mortgage or repay the capital amount of the loan at the end.
Name (1st Applicant) / Signature
Date
Name (2nd Applicant) / Signature
Date

Part 2B: Complete When Customer Arranging A New Investment To Repay Part / All Of Loan

The value of investments may go down as well and up and you may not get as much at maturity as you expected to clear the debt.

If the arrangement involves you making specified regular payments, you must ensure you keep making these payments.

What type of investment do you intend to arrange? / (Tick ALL that apply)
Endowment policy
Personal pension
Equity ISA
Other
- If ‘Other’, please describe
Applicant declarations(tick boxes) /

Self

/ Partner
I understand that it is my responsibility to make sure that I do arrange a suitable investment to repay my mortgage
I understand that, once it has been set up, I need to monitor it regularly to make sure it remains on track to cover the amount of debt it is intended to repay
I understand that my home is at risk if I fail to either keep up repayments during the term of the mortgage or repay the capital amount of the loan at the end.
Name (1st Applicant) / Signature
Date
Name (2nd Applicant) / Signature
Date
Adviser to use this box to add any additional notes about the customer’s plans