Repayment or interest only
Once you have decided on the most suitable mortgage interest rate type, you can choose from one of the following repayment methods, or combine as a part and part:
| Repayment | Interest only | |
|---|---|---|
| At a glance | You pay off capital and interest each month | You pay off interest only each month |
| Description |
You repay both the interest and a small percentage of the borrowed capital each month. That means that your mortgage will be paid off in full at the end of the mortgage term if you continue to meet your payments and pay on time. |
Your monthly payments only cover the interest on the amount you owe, so you're not reducing the outstanding mortgage each month. You will need to put additional money aside to repay your mortgage at the end of the term, for example into an investment such as an endowment policy or ISA. |
| Additional repayment plan needed? | No | Yes - see below |
| Daily interest |
With any Nationwide mortgage your interest is calculated daily, meaning you can save money in the long run. For example, each time you pay off part of your mortgage, whether it's a regular payment or an overpayment, the interest is recalculated the next working day. This means that you only pay interest on what you owe. It's the fairest way of charging mortgage interest. This reduces your mortgage balance without waiting for the end of the month - or even the end of the year. | |
Important information for interest only or part and part mortgages:
You can choose to have part repayment and part interest only for your mortgage.
If you're happy to accept the risk with an interest only, or part and part deal, we can offer you a mortgage with these methods provided that:
- you have a suitable repayment plan, such as an ISA or an endowment policy or
- are prepared to sell your house at the end of the mortgage term to repay the debt. If this is the case, you will need to have at least £150,000 equity in your existing property and we will only lend you 66% of the property value or
- You intend to sell a second property to repay the loan. The equity in the second property must be at least 120% of the new mortgage amount it is intended to cover.
Please note that if there are insufficient funds from these repayment methods to repay your mortgage you will have to find an alternative means of repaying the shortfall.
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