Investments and savings
ISA portfolios, stocks and shares, and other investment vehicles are commonly used as repayment strategies. Lenders will want to see the current value of your investments and may apply a discount to account for market fluctuations. A portfolio currently worth £250,000 might only be credited at 80–90% of its value for repayment purposes.
Regular savings plans can also form part of a repayment strategy, though lenders will assess whether the projected savings over the remaining mortgage term are realistic given your income and expenditure.
The key is demonstrating that your investments or savings have a reasonable prospect of reaching the required amount by the end of the term. Diversified portfolios with a track record of growth are viewed more favourably than speculative or concentrated holdings.
Sale of property
Planning to sell the mortgaged property or another property you own is a common repayment vehicle. For downsizers, the intention is to sell the current home and buy a smaller property with the equity, using the surplus to clear the mortgage. For investors with multiple properties, selling one can repay the mortgage on another.
Lenders will assess the current value of the property you plan to sell and factor in the equity available after any existing mortgages and selling costs. They may also consider the local property market and whether the plan is realistic over the remaining term.
Pension lump sums
Under pension freedom rules introduced in 2015, you can withdraw up to 25% of your defined contribution pension pot as a tax-free lump sum from age 55 (rising to 57 from 2028). Many lenders accept this as a repayment vehicle if the projected lump sum is sufficient to clear the mortgage.
You will need to provide pension statements showing the current pot size, and the lender will model whether the projected value at the time you plan to access it will be enough. Growth assumptions vary between lenders, so broker advice is valuable here.
Defined benefit pension lump sums (commutation) can also be used, though lenders need to see the scheme’s rules and projected commutation value. Not all defined benefit schemes offer a lump sum option, and the amount available depends on the scheme’s rules.
Combination strategies
Many borrowers use a combination of repayment vehicles rather than relying on a single source. For example, a pension lump sum might cover 60% of the capital, with savings and investments covering the remaining 40%. Lenders are generally comfortable with combination strategies provided each element is well documented and credible.
Review your repayment strategy regularly, ideally annually. Market conditions, property values, pension projections, and your personal circumstances can all change over a 25-year mortgage term. Early action if any element is falling short gives you more options to get back on track.