Homeowners remortgaging with Nationwide can secure larger home loans amounting to an additional £34,000.
Nationwide Increases Maximum Loan Amount for Remortgaging Homeowners
In a significant move, Nationwide Building Society has increased the maximum loan amount for remortgaging homeowners, allowing them to potentially borrow up to £28,000 more on average. This change follows a reduction in Nationwide's affordability stress rates, as clarified by the Financial Conduct Authority (FCA).
The key factors influencing the new borrowing limit include reduced affordability stress rates, the buyer's income and financial situation, property valuation and equity, and the current mortgage terms and timing.
The reduction in affordability stress rates lowers the monthly payment burden used in affordability assessments, enabling higher loan amounts. The borrowing capacity also depends on the applicant's income as well as their financial commitments. The value of the home and existing equity impact loan-to-value (LTV) ratios and thus borrowing potential. Homeowners are encouraged to start remortgaging up to six months before their existing fixed term ends to secure better rates and borrowing conditions.
Under the new rules, homeowners remortgaging to Nationwide can borrow up to 4.5 times their collective income. This change applies across all buyer types but notably boosts remortgage borrowers, making it easier for them to secure higher borrowing amounts.
The Helping Hand scheme for first-time buyers at Nationwide has also been updated, allowing them to borrow up to six times their yearly income with a 5% deposit. This scheme is specifically for buying new-build homes.
It is important to note that the increased loan amount is only available for customers taking a five or 10-year fixed-rate mortgage with a 40-year term. Homeowners who own their property alone need a minimum yearly income of £40,000, while couples require at least £70,000 to benefit from Nationwide's enhanced affordability check.
The stress rates at Nationwide were implemented as a measure to prevent homeowners from taking unaffordable loans after the 2008 financial crisis. The new maximum loan does not apply to existing Nationwide customers who are remortgaging.
This change could encourage people who need to remortgage to switch to a new lender and potentially get a better rate.
[1] Nationwide press release
[2] Money Saving Expert article
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