Investments and savings
ISA portfolios, stocks and shares, and similar investments are a common way to repay the capital. A lender will ask for the current value and may knock it down a little to allow for the market moving. A portfolio worth £250,000 today might only be counted at 80% to 90% of that when the lender assesses it.
A regular savings plan can play a part as well, though the lender will check whether the amount you expect to save across the rest of the term looks realistic against what you earn and spend.
What matters is showing your investments or savings have a fair chance of hitting the target figure by the end of the term. A spread-out portfolio with a record of steady growth tends to get a warmer reception than something speculative or heavily concentrated in one place.
Sale of property
Selling the mortgaged home, or another property you own, is another well-worn route. Downsizers plan to sell the current home, buy somewhere smaller with the equity, and use what is left to clear the mortgage. An investor holding several buy-to-let properties might sell one to pay off the loan on another.
The lender looks at what the property you intend to sell is worth now, then works out the equity left once any existing mortgage and the costs of selling are taken off. They may also weigh up the local market and whether the plan holds together over the years you have left.
Pension lump sums
Under the pension freedom rules brought in during 2015, you can take up to 25% of a defined contribution pension pot (the type built up from contributions rather than a fixed salary promise) as a tax-free lump sum from age 55, rising to 57 from 2028. Plenty of lenders accept this as a repayment vehicle, as long as the lump sum you are on course for will cover the mortgage.
You will need pension statements showing the pot as it stands, and the lender will model whether its likely value, at the point you plan to draw on it, comes to enough. Different lenders assume different growth rates, which is where broker advice earns its keep.
A defined benefit pension can provide a lump sum too, through what is called commutation, where you give up part of the annual pension in exchange for cash up front. The lender will need to see the scheme rules and the projected figure. Not every defined benefit scheme offers a lump sum, and where it does, the scheme rules set how much you can take.
Combination strategies
A lot of borrowers lean on more than one repayment vehicle rather than betting everything on a single source. A pension lump sum might cover 60% of the capital, say, with savings and investments making up the other 40%. Lenders are usually fine with this, provided each part is properly documented and credible on its own.
Look over your repayment strategy regularly, once a year is sensible. Markets move, property values shift, pension forecasts get revised, and your own life changes over a 25-year mortgage term. Spotting early that one part is falling behind gives you far more room to put it right.