Our product of the month goes to Optimum Credit again, due to their recently announced innovative interest only product with a built in credible repayment strategy.
How does the product work?
- At the end of the advised sales process if a 2 or 5 year interest only variable rate loan is chosen, the customer will pay an interest only payment for 2 or 5 years. The payment could rise or fall during the interest only period
- At the end of the advised sales process if a 2 or 5 year interest only fixed rate loan is chosen, the customer will pay an interest only payment for 2 or 5 years. The payment will not change during the interest only period.
- At the end of the 2 or 5 year interest only period, the loan will revert to capital and repayment. The customer will be contacted, in writing, prior to the expiry of their interest only period advising them of the new capital and interest repayment. An indication of the reversionary payment will also be shown on the ESIS document.
Who is the target audience?
The following list is not intended to be exhaustive as your advised sales process will assist in ensuring that the product is only chosen where you have met the needs of your customers:
- Customers who are expected to see an increase in their income over time; examples include doctors and solicitors who typically improve their income with experience and time served
- Families who are currently paying private school fees or funding university, and the income will become available once their children leave education
- Customers who are involved in large home improvement projects, where cash flow is initially used to help fund the improvements, which will not be needed once the project has completed
- Customers who are tied into arrangements on their first charge mortgage, and would like to minimise their repayments before concluding refinancing arrangements for the total amount borrowed
- Customers who are looking to refinance bridging finance arrangements would benefit from the probable lower interest payments and a built in credible repayment strategy without time pressures and excessive fees
Product features and highlights:
- 2 & 5 year interest only variable rates
- 2 & 5 year interest only fixed rates
- Available to prime customers only
- Minimum Loan size: £20,000
- Maximum loan size including fees: £250,000
- Maximum LTV is 65%
- 15 – 25 year terms
- Applicants must have no CCJ’s or defaults of any size
- Applicants must not be due to retire during the interest only period
Early repayment charges:
- There are no early repayment charges on the 2 and 5 year variable rate product
- The 2 year fixed rate product has a 2% charge in year 1 and 1.5% in year 2
- The 5 year fixed rate product has a 5% charge in year 1, 4.5% in year 2, 3% in year 3, 2.5% in year 4 and 1% in year 5
Overpayments or lump sum payments are allowed at any time without penalty, provided the overpayment or lump sum payment is more than the contractual monthly payment.
Optimum will calculate affordability based on the reversionary capital and interest repayment. In addition, they will be applying a stress to the 5 year fixed rate payment.
READ MORE about the client scenarios we’re able to assist you with