Interest only

Key criteria

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

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.

If your client would like to temporarily change to interest only payments, please visit nationwide.co.uk (opens in a new window)

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

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Eligibility

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

• maximum 75% loan to value (LTV)
• minimum income criteria of £75,000 for sole applicants, £100,000 for joint applicants*. We base minimum income on primary basic income only.
• minimum equity at application varies by region**. We'll base this on the region selected on the 'Loan Requirements' page on NFI Online. To check the region of the property, use the House Price calculator (opens in a new window). 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. For example, 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
• they have a secured loan which has been found at the Bureau but isn't declared
• they have a secured loan declared, but we find a higher monthly payment at the Bureau
• they're retired, or the term will go into retirement.

* The minimum income criteria will determine if your clients are eligible for our interest only product. We'll make the assessment by using their primary basic source of income.

** We'll automatically apply minimum equity at the DiP stage. If there's any impact on the minimum equity requirement after the valuation, it could mean that your client is no longer eligible for this proposition.

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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

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How to key a case on NFI Online

To submit a case, just follow the 5 key steps below.

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

If you select 'interest only (new borrowing)' it 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, 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. This will unlock the 'would the applicant(s) like to port any of these mortgage accounts' question.

Step 3

Under Product selection, select either 'Interest Only' or 'Part and Part' as the Repayment basis.

Step 4

Within the 'FMA' you will see display the Repayment Plan Details. 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. If it's Part and Part, this will be defaulted to the amount chosen for Interest Only. You will see a warning message displayed if confirmation hasn't been given.

 

Step 5

On the Decision in Principle (DiP) results screen, you will see 'proof requirement'. This is for the customer declaration which they will need to sign.

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