Interest Only

Interest Only mortgages

With an Interest Only mortgage, your client only pays the interest on their mortgage balance every month.

This means their monthly payments may be lower compared to a repayment mortgage of the same amount. It also means they will need to repay the full balance when the mortgage term ends.

When you apply, we will need to know how your client intends to pay the balance. This could be by selling the property, or by using any combination of the other repayment plan options listed below.

Part and Part mortgages

With a Part and Part mortgage, your client pays off some of the mortgage balance, but not the whole amount. This means their monthly payments may be lower compared to a repayment mortgage of the same amount. It also means they will have a balance to pay off when the mortgage term ends.

Except for loan to value (LTV), a Part and Part mortgage shares the features and eligibility criteria of an Interest Only mortgage, including repayment plan options.

The maximum LTV for Part and Part is 85%. Of this, up to 75% LTV can be on an Interest Only basis.

Features

• Available across our new purchase and remortgage product range, including first time buyers
• Interest Only maximum 75% LTV
• Part and Part maximum 85% LTV
• Maximum term 40 years, or retirement if sooner (maximum age 70)
• Maximum loan amount of £5 million.

Eligibility

✔ Minimum income criteria £75,000 for sole applicants, £100,000 for joint applicants (unless one applicant earns £75,000). We base minimum income on primary basic income only.

✔ Minimum lease term 70 years at application.

✔  Minimum equity requirements apply only where Sale of Main Residence is being used as the Mortgage Repayment Vehicle.

Your client won't be eligible if:

✖ They are capital raising to repay unsecured debt.

✖ They declare a secured loan, but they're not settling it.

✖ They have not declared a secured loan, but one is found at the credit reference agency.

✖ They declare a secured loan, but we find a higher monthly payment at the credit reference agency.

✖ They're retired, or the term would go into their retirement.

✖ They want to use Interest Only in conjunction with any other scheme. For example, Shared Ownership, Right to Buy, Helping Hand.

✖ The property will not be your client's main residence. For example, a holiday home.

Mortgage repayment plans

Your client can either choose to sell their main residence to repay the mortgage balance at the end of their term, or use a combination of other repayment options.

Options for existing customers

Porting

New Interest Only borrowing is only available to applications without porting. If your client has an existing Interest Only or Part and Part mortgage and wants to port, any additional lending must be on a repayment basis only.

If your client wants to purchase with new lending on an Interest Only or Part and Part basis, speak to your BDM.

Additional borrowing (further advance)

Interest Only is not available on Additional borrowing applications.

Affordability

Some applications will be assessed on Interest Only affordability, but not all. If Interest Only affordability is not available, the application will be assessed in the same way as our repayment mortgages. To understand if your clients are eligible for Interest Only affordability, you will need to complete a Decision in Principle.

Use our updated affordability calculator to find out if your client is likely to be able to borrow the Interest Only amount they want.

How to apply

If your client will use sale of main residence as their repayment plan, they will need to sign our sale of residence customer declaration form (PDF, 55.4KB, Opens in a new window).

You 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 mortgage balance at the end of the term.

If your client uses any other combination of repayment plan options, NFI Online will generate proof requirements based on what you have keyed. Do not submit any proofs that have not been requested.