HSBC opens up its interest-only mortgage policy
Page edited and updated 18/06/2024.
HSBC has simplified its interest-only mortgage policy and no longer restricts its use to HSBC Premier customers.
In order to be eligible for one of HSBC’s interest-only mortgages, single applicants will be required to have an annual minimum income of £75,000. For joint applications, at least one applicant must have an annual minimum income of £75,000.
Aaron Strutt, product director at Trinity Financial, says: “It is quite incredible how the mortgage market has changed from virtually no high street lenders offering interest only to the point where most are actively trying to issue interest-only mortgages. There is a lot of competition in this sector now, although HSBC has a track record of issuing larger mortgages with low rates and reasonable setup fees."
HSBC's acceptable interest-only repayment plans
Interest-only mortgages are available to HSBC's new and existing customers, provided they meet the income eligibility criteria. However, the bank will want to know how the interest-only mortgage will be repaid. Acceptable repayment vehicles include savings, endowments, Stock and shares ISAs, investments, and the sale of other properties.
HSBC's interest-only maximum mortgage term
With an HSBC interest-only mortgage, the maximum term is 25 years (subject to its maximum age policy), and the minimum is five years. Depending on the loan size, the maximum loan-to-value is 75% for remortgage and property purchase applications.
Understanding the Pros and Cons of an Interest-Only Mortgage with HSBC
With an interest-only mortgage, you have the advantage of lower monthly payments during the initial period. This can be especially beneficial for borrowers who anticipate an increase in their income or plan to sell their property in the near future. However, it's important to remember that during this period, you're only paying the interest, not the principal amount.
This means your mortgage balance won't decrease, although you can make overpayments over the term, typically of up to 10% of the loan amount with fixed rates. If you opt for a Bank of England tracker mortgage with HSBC, you can make unlimited overpayments because the rates do not usually have early repayment changes.
Ultimately, the decision to pursue an interest-only mortgage with HSBC should be based on an evaluation of your financial needs and objectives.
Call Trinity Financial on 020 7016 0790 to secure an interest-only mortgage, book a consultation, or complete our mortgage questionnaire.
The information contained within was correct at the time of publication but is subject to change.
Your mortgage is secured on your property. Your property may be repossessed if you do not keep up repayments on your mortgage
HSBC offers interest-only mortgages to new customers who meet its strict qualification criteria. The bank also offers existing customers conducting a rate switch interest-only, but this may be for a limited period unless you meet the interest-only switching rules.
The bank will want to know how you intend to repay the mortgage and what your repayment vehicle is to make sure the mortgage is cleared by the end of the term. This is if you want interest-only on a long-term basis.
HSBC is providing Cost Of Living support to its existing customers.
Interest-only can be a valuable alternative to full capital repayment if you want to keep your monthly mortgage payments low.
At least 50 banks and building societies provide interest-only, and many of these lenders offer £1 million+ interest-only mortgages.
The lenders are keen to attract wealthy borrowers, so more interest-only options are available with the sale of the property as the repayment vehicle.
There is not generally a premium to pay for interest-only, so the rates are the same as the capital repayment mortgages.
In order to be eligible for one of HSBC’s interest-only mortgages, single applicants will be required to have an annual minimum income of £75,000. For joint applications, at least one applicant must have an annual minimum income of £75,000. Some mortgage lenders do not have minimum income requirements to qualify for interest-only, although you will need to have equity in your property or a large deposit; the lender may also charge higher rates than HSBC or its director compeitiors.
HSBC does not charge higher rates for borrowers looking for an interest-only mortgage. The bank charges the same if applicants want interest-only or capital repayment. HSBC tends to offer competitively priced rates, especially for borrowers with larger deposits of, say, 40% or 25%. You will need to meet the lender's minimum income requirements to qualify for HSBC's interest-only mortgages and have a clear credit history.
Interest-only mortgages are popular with high-net-worth individuals and are constantly provided by private banks. These mortgages may help borrowers free up cash for other investments, businesses, or family members.
Some private banks can issue interest-only mortgages up to 90% of the property value or through part and part mortgages where some of the loan is on capital repayment.
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