Non-purpose mortgage: a loan without proof of use

A non-purpose mortgage is secured by property, but the bank usually does not require documents showing a specific use for the money. The name does not mean the loan is unsecured. If you do not repay as agreed, the bank can enforce its legal charge over the property.

Purpose and non-purpose mortgages

For a purpose mortgage, the bank checks that the money is used for an agreed purpose such as buying, building or improving a home. A non-purpose mortgage usually does not require that check. You might use it for a large expense or consolidation if the bank permits it.

Terms differ between lenders. Some offer a separate non-purpose product; others offer a purpose loan where, in certain circumstances, you do not need to prove every use of funds. That does not automatically make it a separate non-purpose mortgage.

Security, income and loan amount

The bank values the property and sets the share of that value the loan can represent. The LTV limit on a non-purpose loan may be lower than on a purpose mortgage. NBS limits on monthly repayments and total debt still apply. The bank also assesses income, liabilities and the legal status of the security.

The rate, maximum amount, term and required insurance depend on the bank. Do not compare a non-purpose rate with a purpose-loan rate without matching the amount, term, fixation and all fees.

Consolidating loans

If you want to replace several loans with one, compare balances and total costs. A lower monthly payment may come from extending the repayment term, which can mean paying more overall. Include early-repayment fees, a new valuation and insurance costs.

For mortgage refinancing, use the comparison of your current and proposed loan. If you need additional funds on an existing mortgage, read about mortgage top-ups.