Buy-to-let lending criteria

We have reviewed our lending policies to take account of the current pandemic, and to ensure that we can continue to lend responsibly, we have updated our lending policy:

• If your client is furloughed, gross basic income will be capped at 80% of income up to £30,000 in line with the Government furlough scheme unless it can be evidenced that they are in receipt of more income i.e. because employer is committing to topping up to 100% of wages or above the £30,000 limit
• If your client is self-employed and using the Government self-employed income support scheme, income will be capped at 80% of previous tax year profits up to £30,000 in line with the scheme rules. Where not on a Government scheme, assessment will be as usual. If your client is not currently in receipt of income, then no income will be assessed
• We will continue to accept guaranteed overtime, bonuses, shift allowances and other pay, where it can be evidenced that this income can still be relied on. At present, we will not be able to accept regular overtime, regular bonus, regular shift allowance, annual bonus or commission as assessable income
• If your client is remortgaging from another provider, and has taken a payment deferral, the application will be acceptable where your client has restarted payments.

The maximum number of applicants is four, of whom only two will be used for affordability purposes.

Minimum age

The minimum age is 25.

Maximum age at the end of the term

The maximum age is 85.

Residency and property ownership

The main applicant (the main income earner) must currently own their own and occupy their own residential property in the United Kingdom. The applicants must have resided in the UK for the last two years.

HM Armed Forces personnel who have been temporarily stationed abroad are deemed to have been resident in the UK during their period of overseas deployment. In the case of foreign nationals, the applicants must have permanent rights to reside in the UK and be able to evidence this. We do not accept applicants on working visas.

The deposit

For standard buy-to-let applications, the applicant's own deposit or gift from an immediate family member is acceptable (providing the person making the gift is not occupying the property).

We do not accept builder’s incentives, or personal loans as a source of deposit. Builder’s incentives must be treated as a reduction in the purchase price.

Convictions

Applicants must not have unspent convictions or pending prosecutions for fraud or dishonesty.

Adverse credit

Applicants should not have an impaired credit history.

Minimum loan

The minimum loan is £30,000.

Maximum loan

The maximum loan is £500,000.

Total lending with Nottingham Building Society cannot exceed £1,500,000. Refer to portfolio section for more details. Please speak with your BDM to discuss multiple buy-to-let scenarios before submitting applications.

Maximum LTV for houses

The maximum LTV for houses is 75%. The maximum LTV is inclusive of fees.

Maximum LTV for flats

The maximum LTV for flats is 65%. The maximum LTV is inclusive of fees.

Minimum term

The minimum term is three years.

Maximum term

The maximum term is 35 years.

Repayment methods

Your client can apply for a mortgage on a wholly repayment, wholly interest-only or part repayment/part interest-only basis.

We do not need policies to be assigned to us for interest-only mortgages, but it is your client's responsibility to ensure they have a lump sum large enough at the end of the term to repay the capital they have borrowed.

Sale of mortgaged property is an acceptable repayment strategy.

Unacceptable loan purpose

Unacceptable loan purposes include:

• Properties where the applicant is buying in their personal name from their own limited company
• Regulated buy-to-let applications where the property is being let to a family member
• Sale and rent back scenarios and distressed sales, including remortgages where the original vendor is currently residing in the property 
• Remortgage applications where the property has been owned for less than six months
• Speculative purposes
• Injection of business capital
• Making of gifts
• Repayment of unsecured business loans.

Assessment of rental income

• 4.25% for 5 year fixed rates
• 4.25% for like-for-like remortgages
• 5.50% for all other lending.

The rental income is based on your estimate, subject to confirmation from the valuer. The valuer will assess the rental income based on a family dwelling for an unfurnished property.

Minimum income

The annual income for the main earner must be at least £25,000, or we will accept a combined income for joint applicants of £40,000.

A maximum of two borrowers’ incomes can be assessed; however we can accept four applicants on the application in total.

We will accept:

• Employed income (permanent position):
  • Please see the coronavirus update section above for details of our approach where your client has been furloughed
  • The minimum length of time in the current job is six months, as at the date of application
  • We may consider three months in the current job, providing same occupation, no employment gaps and no probationary period
  • Probationary periods – applicants employed in unskilled, manual or clerical positions must have completed any probationary period at the time of applying for a mortgage. Professional employees with long probationary periods (i.e. greater than three months) are acceptable, providing they have completed a minimum of three months in their new employment at the date of application and had at least six months continuous employment in the same occupation immediately prior
  • Basic pensionable salary plus guaranteed overtime, bonuses, shift allowances and other pay, where it can be evidenced that this income can still be relied on.
• Employees on a fixed-term contract:
  • Minimum of six months until expiry are acceptable, provided they are professionals and have worked in the same profession for a minimum of 24 months
  • Acceptable industries in this category include the NHS and IT
  • Unacceptable includes unskilled, manual or clerical workers.
• Retirement income:
  • Occupational or state pension income is acceptable.
• Temporary/agency/zero hour contract workers are not acceptable.
  
  
• Self-employed:
  • Applicants are treated as self-employed where they are a sole trader, are in a business partnership or where they own 25% or more shares in a limited company. The applicant’s latest year’s share in profits will be assessed or salary and dividends for limited company directors. The latest year’s accounts must not be more than 12 months old, subject to income fluctuating by no more that 20% year on year
  • We would normally like the applicant to have three years’ trading figures, although our minimum requirement is two full years’ trading figures plus a projection based on at least six months trading for the third year. Their accountant will need to provide a satisfactory reference/explanation and a six month projection
  • We don’t normally require sight of accounts, unless specifically requested by an underwriter. We prefer to send a reference to the applicant’s suitably qualified accountant
  • Acceptable qualifications are: AAPA, FAPA, ACMA, FCMA, ACA, FCA, ACCA, CA, CPFA and FCCA. Where no suitably qualified accountant is available, we will use a minimum of three years of SA302s, when provided together with the corresponding HMRC tax overview to show that the tax due has been paid in full. Each SA302 and tax year overview must relate to a full 12-month trading period
  • We will not assess other earnings or income from foreign currency.

The property must:

• Be located in England or Wales
• Have an EPC rating of E or higher dated in the last 10 years
• Provide basic standards 
• Have a maximum of four bedrooms
• Be subject to selective licensing but is not a house in multiple occupation.

Tenancy criteria

• The AST must be renewable at least every 36 months, and no less than six months
• Where the tenancy is longer than 12 months, it must be in the form of a DCLG model agreement.
• Maximum of four people on an AST.

Property to be let as a holiday let is not accepted on buy-to-let products. Please refer to our commercial lending team for more details.

Property type criteria

Flats

• £100,000 minimum property value
• Where flats are in a block:
  • Maximum of 10 stories in a block
  • Flats above the fourth floor need lift access
• Flats and studios need a minimum of 35sq meters
• Leasehold only (85 year lease minimum)
• Must be a minimum of two years old and have been previously occupied
• The following types will be unacceptable:
  • Property with any commercial use, including flats in a block containing commercial, retail and leisure outlets.
  • Flats converted from an office or industrial building
  • Ex local authority flats, apartments or maisonettes
  • New build flats 
  • Flats with open deck or balcony access.

Houses

• £70,000 minimum property value
• Freehold
• Leasehold, subject to a minimum unexpired lease term of 85 years
• Maximum three floors

Acceptable properties

Construction methods

• Brick or stone walls 
• Structurally Insulated Panel Systems (SIPS)
• Modern steel frame
• Modern timber frame or oak frame
• Wimpey ‘no fines’ and Easy Form can be considered subject to a satisfactory valuation
• Insulated Concrete Formwork (ICF).

Cladding

Properties can be clad in: 

• Traditional bricks or stone
• Brick slips
• Metal (zinc, copper, aluminum or steel)
• Modern render system (cement, line, acrylic or silicone)
• Timber up to 25% of external wall surface area.

Roofing

Acceptable roofs include:

• Pitched slate or tile roof 
• Thatched
• Flat roofs are acceptable subject to a minimum of a 25 year insurance backed guarantee.

Solar panels

Houses fitted with solar panels are acceptable, provided that:

• Buildings cover includes adequate insurance to cover any damage caused to the property by the solar panels
• The lease agreement meets the Society’s minimum standards.

For remortgage applications on houses with solar panels fitted under a lease agreement, please note that our ‘free legal service’ is not available.

Unacceptable properties

• Straw bale, hempcrete and volumetric construction
• Mobile homes and houseboats
• Any construction covered by the housing defect legislation, such as high alumina cement; unrepaired prefabricated reinforced concrete, large panel systems
• Sedum (living green) roofs
• Properties with timber cladding covering more than 25% of the surface wall area.

• Property that is classified as a House of Multiple Occupation (HMO). This includes properties subject to mandatory, selective or additional licensing requirements
• Second homes or holiday homes for personal use
• Holiday lets
• Properties not in a habitable condition
• Property intended for sub-letting (the applicant lets the property to the local authority who in turn offers the property for social housing)
• Properties being purchased from or connected to a property club.

Where a property is in a neighbourhood that is predominantly HMO licensed properties, we advise applicants/advisers to check with the relevant local authority whether the property is likely to require an HMO license prior to submitting an application.

Definition

Where the total number of properties (including limited company buy-to-lets) at the application level, including the property to be mortgaged is four or more, the applicant is considered to be a portfolio landlord. 

Properties held in the names of any of the borrowers, whether solely or jointly, should be included in the portfolio.

Portfolio criteria

The following additional criteria will be applied to the overall buy-to-let portfolio, including unencumbered properties and properties to be managed.

Maximum LTV for the portfolio

The maximum LTV for the portfolio is 75%.

Maxmum buy-to-let portfolio size

The maximum buy-to-let portfolio size is 15 buy-to-let properties.

The overall portfolio must be evidenced as self-supporting by the rental income across the whole portfolio to (including unencumbered properties and the property to be mortgages) to meet the following income coverage ratio calculation:

• Maximum interest coverage ratio of 160%
• Assumed stressed interest rate of 4.25%

A fully completed assets and liabilities form must be provided, which includes details of their background portfolio and business plan. The business plan must show that the landlord:

• Has at least three years experience in managing investment properties
• No more than 25% of the overall portfolio are HMO properties
• Has considered the ongoing and future management of the portfolio including professional and management fees.
  
  

Limited company criteria

• Loan to value up to 75% 
• Limited company should be an SPV with one of the following SIC codes:
  • 68100 - buying and selling of own real estate
  • 68209 - management of real estate on a fee on contract basis
  • 68320 - other letting and operating of own or leased real estate 
• Partnerships or LLPs will not be considered
• Directors and company shareholders are required to be the same, up to a maximum of 4 directors
• The rental income must cover at least 125% of the monthly interest payment on an interest only basis. The mortgage payment is calculated at 5.50%.

Additional information

Personal guarantees for the full loan amount will be required for all directors of the limited company; a floating charge will not be required. The assessment of the application will include reviewing all other properties owned by the limited company.

Consumer buy-to-let (CBTL) rules will apply to remortgage applicants who don’t own any other let properties and either:

• Wish to let their current residence whilst purchasing a new residential property (known as a let-to-buy)
• Have inherited the property and wish to let it
• Have themselves, or a close relative, previously resided in the property and now wish to let it.

All advisers submitting a CBTL application will need to hold the relevant CBTL FCA permissions in addition to their normal mortgage permissions, and must be on an advised sale basis.

The way we assess buy-to-let applications and the choice of products on offer will be the same for both CBTL and IPL.

For standard buy-to-let applications, if your client is remortgaging their current residential home onto a let-to-buy basis with us, we will need to see a copy of their new residential mortgage offer on the property they are buying. If the residential property is being purchased with cash, we will require to see the memorandum of sale and will require full details of the purchase.

Currently no further advances are available for buy-to-let mortgages.

For each application we require:

• A signed application declaration or application form
• A completed assets and liabilities form
• Proof of income for non-portfolio applications:
  • Employed income for non-portfolio applications:
    • Latest pay slip
    • Latest bank statement showing all transactions.
  • Employed income for portfolio applications:
    • Three month’s pay slips
    • Three month’s bank statements.
  • Self-employed (including director with 25% shareholders or more:
    • Three years accounts or SA302s and tax year overviews. We may need to write to the applicants' accountant (subject to acceptable qualifications) for a reference.
• ID for each applicant:
  • UK or EU passport
  • UK photocard driving licence (full or provisional)
  • UK paper driving licence (full only)
  • Council tax bill.
• Proof of address for each applicant – it is assumed that proof of address will be verified by the electoral roll search we undertake. If verification does not occur, you will be asked to submit one of the following documents:
  • UK photocard driving licence (full or provisional)
  • UK paper driving licence (full only)
  • HMRC tax code notification
  • State benefit letter
  • State pension letter
  • Tax credit or pension credit letter
  • Recent utility bill
  • Council tax bill
  • Local authority tenancy agreement
  • Bank statement (postal or printed and stamped in branch)
  • Credit card bill (postal only)
  • Mortgage statement.

We cannot use the same document to check the applicants ID and their address. 

If you cannot provide any of the above documents please contact the intermediary support team on 0344 481 2010 and press option 2 to discuss further options.