Switch to interest only - Nationwide being ridiculous

matte1234 · 27 April 2009 at 4:58PM

I have an average 3 bed (worth £170k according to Nationwide’s house price calculator), our mortgage is just short of £100k so that’s an LTV of about 59%.

Our household income has halved recently due to various circumstances so I thought an ideal solution would be to switch our mortgage to interest only for a few months until things stabilise.

I rang Nationwide and the guy on the phone told me we would need at least £150k equity in the property to be considered. By my calculations that's an LTV of about 12%, why on earth would I want to switch to IO if I only had a mortgage of £20k???

Has he got it wrong, this can't be right can it?

matte1234 · 27 April 2009 at 5:12PM

Just been on the phone again to confirm this and the guy said we would need at least £150k in capital… thanks for nothing.

I was always pleased with Nationwide's service but it seems their lending criteria is so tight they won't be able to help anyone should they have problems.

Repo's are going to be a record high if this is the sort of 'help' the financial institutions are offering.

koexelek · 27 April 2009 at 5:14PM

That sounds very harsh.

The "treating customers fairly" campaign is obviously not a high priority at Nationwide :rolleyes:

patchwork_cat · 27 April 2009 at 5:52PM

They offer a part and part mortgage would it be worthwhile asking about that? Alternatively ring them again and explain the situation and see what they will offer you - it is not in their interests to have to repossess you so I would try again and not suggest the interest only option, but ask what can they do to help.

alphason · 28 April 2009 at 3:32AM

I changed my Nat mortgage in October last year from repayment to interest only.

It depends on what you have in place to repay your mortgage.If you say you will repay from the sale of your residence you must show 150,000 equity and LTV <66%. But if you say you will repay by an ISA, endowment or a pension then the LTV and equity does not matter.

They will ask you for a name of the provider, start date, maturity date, monthly payment and projected maturity value. It's a simple one page form with no evidence needed other than your declaration on the form, they don't check up on it.

I used the projected cash lump sump of my pension and they changed the term of the mortgage to match this. There was no charge either to change over. The form you need is SF211.

Hope that help.

dunstonh · 28 April 2009 at 9:20AM

It seems harsh but the FSA have been bleating on for some time saying lenders shouldnt be doing interest only without a repayment vehicle and it certainly shouldnt be used for those as a way to borrow money who cannot afford a repayment mortgage.

Seems like they are taking the warnings on board and applying it to existing business as well as new.

matte1234 · 28 April 2009 at 5:48PM

Only an hour ago the nice lady at my local Nationwide branch rang and confirmed that I couldn't switch without 150k equity but... I could have a payment holiday or the same but interest only for 3-12 months.

That is what I was asking for!!!! Call centres eh??:rolleyes:

Joe_Bloggs · 28 April 2009 at 6:58PM

Can you request the Nationwide to temporarily increase the term of your mortgage ? This would leave the repayment vehicle in place and cut down on the monthly repayments.
J_B.

matte1234 · 29 April 2009 at 3:31PM

Joe_Bloggs wrote: »

Can you request the Nationwide to temporarily increase the term of your mortgage ? This would leave the repayment vehicle in place and cut down on the monthly repayments.
J_B.

The payment holiday on offer would have the same effect, if I just pay interest only for 12 months that would add a year to the mortgage, if I paid nothing for 12 months the mortgage blanace would increase so it would add even more.

I think I'll just go IO for 12 months.

Joe_Bloggs · 29 April 2009 at 5:39PM

I have no experience of taking a payment holiday with the Nationwide, or going interest only. One matter of interest is how a payment holiday is reported to the credit reference agencies by Nationwide?
J_B.

sammyjammy · 29 April 2009 at 5:39PM

If you look at it from their point of view if you take an IO payment holiday for a set period of time thats different to just switching to IO only and not having a repayment vehicle in place, they don't know that you are going to switch it back do they, stupid man on the phone should have suggested that when you spoke to him though.