Residential lending criteria

The application

Advice

We only accept residential applications on an ‘advised’ basis. We currently do not offer an ‘execution only’ service to applicants.

Minimum loan

The minimum loan is £30,000.

Maximum loan

The maximum loan is £750,000 (inclusive of any capitalised fees)*

*Restrictions applicable to the maximum loan amount:

Maximum loan for Flat/Maisonette: £500,000
Maximum loan may be limited due to the maximum HLC/MIG available
Mortgage Product criteria may specify a maximum loan amount.

Maximum LTV

95% LTV for loans up to £500,000
80% LTV for loans above £500,000 up to max £750,000.

Repayment method restrictions

Where the loan comprises any element of interest only, the following restrictions apply:

Maximum loan amount for interest only component (inclusive of capitalised fees) - £500,000
Maximum loan amount for part-and-part (inclusive of capitalised fees) - £750,000
Maximum LTV for entire loan - 80%.

Term

The maximum term is 40 years.

Interest only

Allowable up to a maximum of 80% LTV. If over 80%, the whole loan must be on a capital and interest repayment basis
We require in writing, a description of the repayment vehicle to repay the mortgage at the end of the mortgage term
We require the repayment vehicle to have been in place for six months before the mortgage application is submitted.

Examples of acceptable repayment vehicles

Endowment
25% of the projected total value of a defined contribution pension plan
100% of projected lump sum value of a defined benefit plan
Equity ISA
Sale of investment property or second home, unless occupied by a family member and then not acceptable. Must be owned in applicant/s name only
- We will accept sale of an investment property, or second home in England and Wales, provided the equity in the property is currently sufficient enough to cover the amount being borrowed
- Where a shortfall is identified, this element must be on either a capital and interest repayment basis, or the shortfall made up by means of increasing the deposit
- It is your clients’ responsibility to ensure they have sufficient capital to repay the mortgage at the end of the term.

Examples of unacceptable repayment vehicles:

Downsizing
Conversion to repayment in the future
Cash ISA
Overpayments from income
Future inheritance.

The deposit

The applicant/s own deposit or a gift from family is acceptable
We do not accept builders’ deposits
Purchase under value between parent/child can be considered.

Debt consolidation and capital raising

Considered up to a maximum of 80% LTV. If the application includes capital raising for the purpose of gifting the proceeds to a third party, we will require a gifting declaration form to be completed and submitted with the application.

Equity purchase

We will consider equity purchase up to a maximum of 90% LTV.

Home improvements

Considered up to a maximum of 90% LTV. Estimates will be required where borrowing above 80% LTV.

Remortgages

Properties that have been owned for less than six months will be considered on an individual basis. In these circumstances, the 'free legal service' will not apply.

Credit scoring

Our application systems create a soft footprint on decision in principle applications; this is converted to a hard footprint at full mortgage application.

The applicant(s)

Minimum age

The minimum age is 18 (55 for a Retirement Interest Only (RIO) mortgage).

Maximum age

The maximum age is 75 (at end of the mortgage term)

We will require written confirmation from the adviser on the broker declaration form if the applicant does intend to continue to work to age 75. The type of employment will need to reflect their ability to work to age 75.

Lending into retirement

Where the proposed mortgage term is likely to exceed our assumed applicant retirement age of 68, the ability to continue to pay the mortgage on a potentially reduced income should be documented.

Maximum LTV restrictions will apply for applicants who will be lending in or into retirement

Lending into retirement - if the applicant (or in the case of a joint application, either applicant) is in receipt of earned income, and the term of the mortgage extends beyond the age at which the income earner(s) intends to retire (or in the case of a joint application, either income earner) - max LTV 80%
Lending in retirement - if the applicants are not in receipt of any earned income, and will be reliant on pension income only - max LTV 70%

We will carefully consider affordability into retirement for older applicants nearing retirement age.

Residency

The applicant/s must have resided in the UK for the past 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 applicant/s must have permanent rights to reside in the UK and be able to evidence this
We do not accept applicant/s on working visas.

Credit history – subject to passing credit score, we can consider

Bankrupts who have been discharged for at least three years
CCJ or IVA – a single satisfied CCJ up to £500 may be considered
CCJs and defaults above £500 must be satisfied for at least three years
Satisfied defaults up to £250 may be considered where there are none for a mortgage, secured or unsecured loans
Two missed payments in the two last years for secured mortgage/rent payments/secured loan now up to date may be considered.

Employment

At the time of the application, the minimum length of time in the current job is six months. We may consider three months in the current job, providing same occupation, no employment gaps and no probationary period.

Probationary periods are accepted for professional applicants 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.

Employees on a fixed-term contract, with a minimum of six months until expiry, are acceptable providing they are professionals and have worked on fixed-term contracts in the same profession for a minimum of 24 months (i.e. acceptable industries in this category include the NHS and IT, while unacceptable include unskilled, manual or clerical workers).

Temporary/agency/zero hour contract workers are not acceptable.

We will consider applicants on maternity leave and will assess the return to work salary. Please provide us with:

The last pay slip prior to maternity leave starting, showing the full-time salary
The applicant/s will need to confirm the following information in writing:

The intended return to work date
Whether they will be returning to work full or part time and the pro rata salary as applicable
Full details of maternity leave pay i.e. how many weeks left at full pay, half pay and SMP
What savings provisions they have in place to support the mortgage whilst on reduced pay
What childcare costs (if any) will be payable when they return to work.

Affordability and income

The affordability calculator will automatically apply deductions to gross income, based on tax bands and NI contributions to calculate the net income. We will assess an applicants borrowing ability using an affordability calculation based on their income, commitments and expenditure. this will confirm the maximum amount we will be prepared to lend.

Employed income

The affordability calculator will automatically apply deductions to gross income, based on tax bands and NI contributions to calculate the net income.

Pay rise

We will consider a pay rise where this can be evidenced with a payslip showing the increase and a bank statement showing the new salary credit.

Other income we may assess

Car allowance - 100%
Large town allowance - 100%
Guaranteed bonus/overtime/shift allowance - 100%
Regular overtime or bonus (monthly, quarterly, six monthly, annually – evidence of regularity must be provided) - 50%
Commission - 50%
Maintenance - 50% (with a court order) subject to 6 months' paid evidence on bank statements
Child Tax Credit - 50% (excluding child care element)
Working Families Tax Credit - 50%
State and occupational pension - 100%
Investment income - not acceptable
Second job income - 50% subject to six months’ track record
Cash in hand - where employees are paid in cash, we need to verify this by regular cash payments being paid into the bank account. If corresponding payments are not being paid in, we cannot assess the income.

Self-employed income

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 than 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.

Commitments and expenditure

The affordability calculator will ask for all monthly commitments and household expenditure. The household expenditure should be based on the property to be mortgaged. We will take into account any monthly credit commitments (including student loans) where there is an outstanding term of six months or more. We will use 3% of the outstanding balances on any/all credit card as the monthly commitment figure if not disclosed.

Retirement income

We will accept the following retirement income:

	Lending types
	Non RIO	RIO
Lending into retirement	Defined benefits pension	Defined benefits pension
Lending in retirement	Defined benefits pension Defined contribution pension	Defined benefits pension Defined contribution pension (annuity only)

Higher lending charge

A higher lending charge is payable on loans above 80% LTV.

Higher lending charges
Advance	Premium
80.00% or below	No higher lending charge
80.01% - 95.00%	We pay the higher lending charge for the borrower

Supporting documents

Residential applicants who own other properties

Applicants must be current owner-occupiers for us to consider proceeding where there are any other mortgages in the background. We may consider an application where the customer is temporarily living with family or renting, due to work commitments and they still own their ex-residential property. We must be totally satisfied that our security will be the customer's main permanent residence. We may require proof of deposit for the new purchase

Let-to-buy

New residential mortgages can be considered up to 90% max LTV where the customer is, for example, upsizing or relocating with their job. We need to be satisfied that the existing mortgages will be converted to a permanent letting agreement and we require:

Consent to let confirmation, in writing, from the existing lender or a copy of the LTB re-mortgage offer from the new lender
Rental coverage of 125% of the mortgage commitment. This calculation must include any additional capital raising for deposit funds. If the rental coverage is less than 125%, any shortfall will be annualised and deducted from income before applying our income multiples to new residential mortgages. No surplus rental income will be assessed
A professional letting agents letter confirming the potential rental income
Where the existing property has little equity or is in negative equity, we may not be able to assist and the case should be referred to us before submission.

Existing residential property up for sale

Where the customer(s) have their existing residential property up for sale, but may not have sold by the time they complete on the new purchase. We will assess as follows:

Up to 90% LTV, we will treat the existing mortgage payment as a commitment
We require a copy of the estate agent's sales details
Above 90% LTV the existing mortgage must be redeemed.

Existing matrimonial/dependent relative(s) mortgages to remain

Where the existing matrimonial/dependent relative(s) mortgage is to remain, we must be satisfied that the new residential property to be purchased is for the customer(s) own use. We will assess as follows:

Up to 90% LTV, we will treat the existing mortgage payment as a commitment
Above 90% LTV the existing mortgage must be redeemed.

Existing buy-to-let properties in background

New residential mortgages can be considered up to a maximum 90% LTV
Applicants must be current owner-occupiers
First-time residential buyers with a BTL property in the background are not acceptable
First-time landlords are acceptable
Professional landlords will be considered and treated as self-employed and we require 2 years’ accounts and/or tax assessments. They will be required to complete an assets and liabilities statement
For non-professional landlords, we will consider treating the BTL mortgage/s as self-financing, subject to:
- Rental coverage of 125% of the mortgage commitment. This calculation must include any additional capital raising for deposit funds. If the rental coverage is less than 125%, any shortfall will be taken into account in the affordability calculation.
- Proof of rental income and mortgage payment/s on the most recent bank statement/s
- Consent to let will be required or proof the mortgage is on a BTL basis (BTL mortgage statement).
Where the existing property has little equity, or is in negative equity, we may not be able to assist and the case should be referred to us before submission.

The property

Acceptable properties

Properties in England and Wales
The property must be the main permanent residence of the applicants
Property must be of traditional construction with brick or stone walls and pitched slate or tile roof
The following cladding types are acceptable: brick, block or other robust cladding / rain screen that is inflammable and non-combustible and with the appropriate safety certification
Modern timber frame or oak frame
Modern steel frame
Structurally Insulated Panel Systems (SIPS)
Insulated Concrete Formwork (ICF)
Wimpey ‘no fines’ and Easy Form can be considered subject to a satisfactory valuation
Flat roofs are acceptable subject to a minimum of a 25 year insurance backed guarantee
New build houses are acceptable up to 90% LTV (we do not accept builders’ deposits)
New Build Warranties - we accept NHBC, Premier Guarantee, BLP, Buildzone, LABC, The Q Policy, Protek and ICW. Other warranty policies are not acceptable
Flats/maisonettes (including new build) are acceptable for owner occupiers (not for BTL applications) but must be leasehold, and maximum 80% LTV
Houses and bungalows with a minimum internal floor area of 50 sq metres, flats and studios with a minimum internal floor area of 35 sq metres
If in a block, must be a maximum of 10 storeys
We will not lend on flats that are above the fourth floor without lift access
If above a shop, flat must have its own entrance separate to the shop entrance
Flats that require a EWS1 form, must provide a valid EWS1 form to support the property valuation.
Solar panels – houses fitted with solar panels are acceptable, provided that adequate insurance is in place to cover any damage caused to the property by the solar panels
For remortgage applications on houses with solar panels fitted under a lease agreement, please note that our ‘free legal service’ package is not available.

Unacceptable properties

Pre-fabricated properties
Steel framed properties (only modern steel frame acceptable)
Timber framed properties with timber cladding
Straw bale, Hempcrete, Volumetric construction
Mobile home/houseboat
Unacceptable roof types; Sedum (living green)
Any construction covered by Housing Defect legislation, such as high alumina cement; prefabricated reinforced concrete; large panel system
Ex-local authority & housing association (ex-public sector flats) including Right to Buy flats
Second homes/holiday homes
Self-build products are available via Build Store
Purchases where the vendor has owned for less than six months.

Valuations

All products are subject to valuation. These are instructed via a panel management company and encompass a variety of national surveying firms.

Tenure

Both freehold and leasehold are acceptable. If leasehold, the minimum required unexpired term on a lease must be at least 85 years from commencement of the mortgage.

The application

Advice

Advice

Minimum loan

Maximum loan

Maximum LTV

Repayment method restrictions

Term

Interest only

The deposit

Debt consolidation and capital raising

Equity purchase

Home improvements

Remortgages

Credit scoring

The applicant(s)

Minimum age

Maximum age

Lending into retirement

Residency

Credit history – subject to passing credit score, we can consider

Employment

Affordability and income

Employed income

Pay rise

Other income we may assess

Self-employed income

Commitments and expenditure

Retirement income

Higher lending charge

Supporting documents

For each application we require:

ID for each applicant we require:

Proof of address

Residential applicants who own other properties

Let-to-buy

Existing residential property up for sale

Existing matrimonial/dependent relative(s) mortgages to remain

Existing buy-to-let properties in background

The property

Acceptable properties

Unacceptable properties

Valuations

Tenure

Special schemes

Right to buy