Interest only

Tip:

Available to new purchase and remortgage customers only.

On 26 June 2023, the government published the Mortgage Charter. If your client would like to temporarily change to interest only payments, please visit nationwide.co.uk

We’ve launched the option to choose Interest Only (IO) or part and part repayment basis across our new purchase and remortgage product range*.

Please see our specific interest only criteria below to ensure your client is eligible before submitting an application on NFI Online.

Eligibility

The following eligibility criteria will apply for our interest only new purchases, remortgages and part and part lending:

maximum 60% loan to value (LTV)
minimum income criteria of £75,000 for sole applicants, £100,000 for joint applicants**. Minimum income is based on primary basic income only.
minimum equity varies by region***. We'll base this on the region selected on the ‘Loan Requirements’ page on NFI Online. To check which region the property is situated in you can use the House Price calculator. Minimum equity levels:

a. £300,000 for Greater London/Outer Metropolitan
b. £250,000 for Outer South East
c. £200,000 for all other UK regions

maximum term of 25 years (or retirement if sooner)
sale of main residence as repayment strategy
You can’t use interest only in conjunction with any other scheme (e.g. Shared Ownership, Genuine Bargain Price, Forces Help to Buy, Right to Buy and Help to Buy)
minimum lease term of 70 years at application
maximum loan amount of £5 million
First time buyers are not eligible for interest only purchase applications.
Interest only isn't available where the security isn't the main residence e.g. it's not acceptable for an applicant to remortgage a holiday home.

We assess cases on a capital and interest basis. Your client won’t be eligible if:

they declare that they have a secured loan, but they’re not settling it
a secured loan has been found at the Bureau but isn’t declared
a secured loan has been declared but we find a higher monthly payment at the Bureau
they're retired, or the term will go into retirement

To apply for an interest only new purchase or remortgage, your client will need to sign our ‘Sale of residence customer declaration form’. They then need to attach it to the case in NFI Online before we can issue any mortgage offer. The declaration confirms that your client understands the requirement to sell their property to repay the outstanding balance at term expiry.

Download our declaration form

How to key a case on NFI Online This will reveal additional content: Step 1

On the ‘Create Case’ screen, select ‘Remortgage’ or 'New purchase' as the Application type.

Step 2

Then on the ‘Loan Requirements’ screen, select ‘Interest Only (New Borrowing)’.

For new purchase applications, selecting ‘interest only (new borrowing)’ will remove the ability to answer 'yes' to porting existing accounts on the existing mortgages screen.

If you decide that you would like to port the existing mortgages and take the additional borrowing on a capital and interest basis instead, you'll need to proceed with interest only (new borrowing). You can do this by going back to the loan requirements screen and unselecting the ‘interest only (new borrowing)’ option to unlock the ‘would the applicant(s) like to port any of these mortgage accounts’ question.

Step 3

Under Product selection, you can select either ‘Interest Only’ or ‘Part and Part’ under ‘Repayment basis’.

Step 4

Repayment Plan Details will be displayed within the ‘FMA’. This will be read only and will be defaulted to ‘Sale of main residence’ as the ‘Repayment plan type’. The ‘Amount’ will be defaulted to the value entered as the ‘Loan Amount’ on the ‘Loan Requirements’ screen or if Part and Part this will be defaulted to the amount chosen for Interest Only. A warning message will be displayed if confirmation hasn’t been given.

Step 5

A proof requirement will be displayed on the DIP results screen. This is for the customer declaration which needs to be signed.

* If you wish to port any existing mortgages in a purchase application, additional borrowing must be on a capital and interest (Repayment) basis only. Interest only new borrowing is only available to non-porting purchase applications. If your client wishes to purchase with an element of interest only they'll need to choose a new product and pay any ERC's applicable on the existing product. If they currently have an existing Interest Only product and are looking to increase their borrowing on interest only, and wish to port with a top up on interest only, please speak to your BDM.

** The minimum income criteria will determine if your clients are eligible for our interest only product and the assessment is made using their primary basic source of income.

*** Minimum equity will be applied automatically at the Decision in Principle (DiP) stage. After the valuation, if there’s any impact on the minimum equity requirement it could mean that your client is no longer eligible for this proposition.

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