Mortgage Intermediary Guide

Transcription

1 Mortgage Intermediary Guide July 2014

2 Click Content Headings to Navigate PDF Contents Page Section 1: Types of Mortgages Mortgages for people buying or moving home 5 Remortgages 7 Guarantor Mortgages for First Time Buyers 9 Self- Build Mortgages 11 Buy to Let Mortgages 13 Lifetime Mortgages 15 Guest House Mortgages 17 Section 2: Fully Packaged Cases documentation requirements Standard documentation 19 Additional documentation: Self build 19 Additional funds 20 Guarantor 20 Lifetime 20 Guest House 20 Section 3: Extracts from Current Lending Policy Standard criteria for mortgages 22 Maximum number of borrowers 22 Age criteria 22 Minimum / maximum term 22 Employment status 22 Income requirements for loans under 80% LTV 24 Income requirements for loans above 80% LTV 25 Accountant qualifications 24 Affordability assessment 26 Income multiples 26 Mortgage / rental payments 26 Credit history impaired credit 27 Foreign Nationals / Expatriates 29 Debt consolidation 30 Assisted house purchase schemes RTB / LIFT/ Armed Forces 31 Valuation of new builds 33 Interest only mortgages 34 Lending into retirement 35 Section 4: Product Criteria Self-build criteria 36 Buy to Let criteria 38 Guest Houses mortgages 39 Guide to Mortgage Term for Lifetime Mortgages 41 Further advances 42 Applications over 80% LTV-Higher lending charge 43 Criteria and costs Mortgage overpayments 44 Mortgage underpayments and payment holidays 44 Valuation fee scale 44 Types of construction 45 Acceptable types of tenure 46 1

3 Contact Details Branch Name Title Direct Dial address Aberdeen Karen Silver Mortgage Adviser Douglas Sharpe Edinburgh Fiona Dyer James Frew Anne Mackay - Mon to Wed only Area Manager Mortgage Adviser Mortgage Adviser Mortgage Adviser d.sharpe@scotbs.co.uk f.dyer@scotbs.co.uk j.frew@scotbs.co.uk a.mackay@scotbs.co.uk Sharon Buckland Area Manager s.buckland@scotbs.co.uk Glasgow Jacki Hamilton Mortgage Adviser j.hamilton@scotbs.co.uk David Richardson Area Manager d.richardson@scotbs.co.uk Galashiels Jan Dodds Mortgage Adviser j.dodds@scotbs.co.uk Alex Moffat Area Manager a.moffat@scotbs.co.uk Inverness Gwen Dingwall Mortgage Adviser g.dingwall@scotbs.co.uk Louise Hooley Mortgage Adviser l.hooley@scotbs.co.uk Neil Walker Area Manager n.walker@scotbs.co.uk Troon Francis Milroy 9am to 1pm daily Wilma McIntosh 1pm 5pm daily Mortgage Adviser Mortgage Adviser f.milroy@scotbs.co.uk w.mcintosh@scotbs.co.uk Derek Christie Area Manager d.christie@scotbs.co.uk 2

4 Introduction At Scottish Building Society we have been helping people in Scotland buy their homes since We are particularly proud of our strong connections with mortgage intermediaries and we truly value these relationships. We always strive to provide a first class service to both the intermediary and the end customer. We believe that a mortgage is one of the most important financial commitments an individual will make and as a responsible lender we are committed to treating each mortgage applicant as an individual. We have developed a range of mortgage products to help those looking to move home or remortgage along with more specialist products such as our Guarantor Mortgage for First Time Buyers, our Self Build Mortgage and Lifetime Mortgage. These guidance notes have been put together to assist Mortgage Intermediaries when considering placing mortgage applications with the Society. Why you should use the Scottish Building Society: We are the oldest Building Society in the world formed 1848 Mortgage business both Introduced and Direct for people who are first time buyers, purchasers and remortgage customers Local our Area Managers know the area and local market Area Managers develop good relationships with intermediaries and have many years of experience in this market Solid reputation with all the valued introducers who are on our panel Local underwriting whole circumstances of case are looked at Not a call centre operation you can speak directly to case manager or underwriter We offer a Decision in Principle (DIP) service We do not credit score based on clean credit and affordability Small product range Discounts and Fixed Rates but with some niche deals such as Guarantor, Lifetime, Self Build and Guest Houses. Guarantor mortgages available on all products Remortgage package free legals and free mortgage valuation Low arrangement fees Procuration fee of 0.40% on all products (self-build fee released at stage 1 completion) Your customers will get fantastic customer service at Scottish Building Society. 3

5 Scottish Building Society We aim to be competitive and we do like straightforward cases, but as a smaller player in a very competitive mortgage market we play to our strengths. We are here to also help mortgage intermediaries place cases which may not be straightforward and need some personal attention - this is where the Scottish differs from the bigger players. We are happy to consider any proposal on a decision in principle basis or simply give us a ring to discuss any particular point of concern on a case and we can guide you on whether the case would be acceptable to the Scottish Building Society. We normally turnaround any queries very quickly but certainly on particularly difficult cases within 24 hours of the query being made. Unlike other large lenders where it is all down to the numbers of cases and systems, if you want your customer to get the individual touch look no further and Welcome to Scottish Building Society. John Lloyd Head of Sales and Marketing Scottish Building Society from a Brokers perspective:- The Scottish Building Society over the last decade or so offered interesting niche products and hence was a useful lender for the Scottish intermediary. More recently management changes have injected a new fervour into the organisation. An influx of solid lenders from the Board downwards has brought about a much stronger proposition for the borrowing community. Not only are rates more competitive, there is a willingness to consider strong credit cases and the Society now offers a haven for applications that cannot be accommodated by the mainstream tick box lenders. That is not to say that the Society is a pushover, far from it: they are exacting and thorough in their credit assessment and it is clear that they take great pride in the quality of their book. For the intermediary it is a considerable comfort to have a capable lender at hand in a market where diligent lending skills are at a premium. Colin F McCallum, Heritable Limited This material is for use by UK intermediaries only 4

6 Section 1: Types of Mortgages Mortgages for People Buying or Moving Home Key Features of Mortgages for People Buying or Moving Home: Suitable for: Purchasers of residential property throughout Scotland. (Some first time buyers may find our Guarantor Mortgage more suitable.) Property: Mortgages are available for owner occupied residential properties. All mortgages are subject to a suitable property valuation. For property purchases in Scotland, we can normally use the property valuation contained in the sellers Home Report as long as it is no more than 3 months old. Maximum Loan: For loans up to 300,000 the applicant can borrow up to 90% of the property valuation or purchase price (whichever is lower). For loans up to 350,000 the applicant can borrow up to 80% of the property valuation or purchase price (whichever is lower). For loans above 350,000 the applicant can borrow up to 70% of the property valuation or purchase price (whichever is lower). Maximum loan size is 500,000. 5

7 Term: How much can I borrow? Applicants must be at least 18 years old on application and the maximum age at end of the mortgage term is normally 70. Minimum mortgage term is 5 years and maximum term is 40 years. All mortgage applications are based on affordability. For loans up to 80% - As a guide we will lend up to: Main income x 4, plus second income x 1 OR Joint income x 3. For loans over 80% of the property valuation or purchase price (whichever is the lower) we will lend up to : Main Income x 3.5plus second income x 1 OR Joint incomes x 2.75 Any existing financial commitments will also be taken into consideration when affordability is calculated. Repayment: Capital and Interest Interest only available up to 75% of the property value or purchase price (whichever is lower) with a maximum loan size of 350,000. We will ask for confirmation that the borrower has an appropriate repayment vehicle in place at the time of application as well as periodically throughout the life of the mortgage. Acceptable repayment vehicles are endowment policies; stocks and shares ISAs; pension lump sums; and second/investment properties (See Page 34) Security: Higher Lending Charge: A first charge will be taken over the property being purchased as security for the mortgage lending. For lending above 80% of the property purchase price or valuation a Higher Lending Charge may be payable. Where a Higher Lending Charge is applicable this can generally be added to the mortgage (See Page 43). Flexible Features: Where Early Repayment Charges apply to any of our mortgages the borrower may be allowed to make overpayments (normally up to 10% of the loan amount per annum) without penalty. Insurances: Buildings Insurance must be arranged prior to funds being released. 6

8 Remortgages Scottish Building Society can help if a borrower is looking to remortgage. Key Features of Mortgages for People looking to remortgage: Suitable for: Property: Maximum Loan: Existing owners of residential property throughout Scotland, who wish to change mortgage provider. Mortgages are available for owner occupied residential properties. All remortgages are subject to a suitable property valuation. For loans up to 300,000 you can borrow up to 90% of the property valuation. For loans up to 350,000 you can borrow up to 80% of the property valuation. For loans above 350,000 you can borrow up to 70% of the property valuation. For remortgages, the minimum loan size is 30,000 and the maximum is 500,000. Term: Remortgage Incentives: Applicants must be at least 18 years old on application and maximum age at end of mortgage term is normally 70. Minimum mortgage term is 5 years and maximum term is 40 years. Free Basic Legal Service: When remortgaging to Scottish Building Society we will provide the borrower with a free basic legal service which means they won t have any solicitor fees to pay. However, the solicitors we use will act only for the Society in the transfer of the mortgage and if the borrower requires any additional services these will require to be paid by them. If the borrower would prefer to use their own solicitors then the Society will contribute 150 towards the cost.; Refund of Valuation Costs: A valuation of the property will be required as part of the mortgage application. The cost of this will be met by the Society in line with our scale of fees.any other valuation requirements should be discussed with the valuer direct and the customer will have to meet the additional cost. 7

9 Repayment: Capital and Interest Interest only available up to 75% of the property value with a maximum loan size of 350,000. We will ask for evidence that the borrower has an appropriate repayment vehicle in place at the time of application as well as periodically throughout the life of the mortgage. Acceptable repayment vehicles are endowment policies; stocks and shares ISAs; pension lump sums; and second/investment properties (See Page 34 for more detail). Capital Raising: Capital raising is allowed up to 80% of the property value for purposes such as personal debt consolidation, divorce settlements, deposits for other properties or home improvements. If the borrower is looking to raise funds on a property which currently has no mortgage on it or for business purposes please refer to Head Office. Security: Flexible Features: A first charge will be taken over the borrower s property as security for the mortgage lending. Where Early Repayment Charges apply to any of our mortgages the borrower may be allowed to make overpayments (normally up to 10% of the loan amount per annum) without penalty. Insurances: Buildings Insurance must be in place prior to funds being released. 8

10 Guarantor Mortgages for First Time Buyers Scottish Building Society can offer a mortgage to help young First Time Buyers get their foot on the property ladder. We have designed this product to allow young people who may not earn sufficient in their own right, to buy their first home with the help of a parent or parents acting as guarantor(s). Key Features of our First Time Buyer Mortgages: Suitable for: People looking to buy their first residential property throughout Scotland. For all applications we will require the parent(s) to act as guarantor for the mortgage where borrowing above 70% of the property value is required. Property: Mortgages are available for owner occupied residential properties. All mortgages are subject to a suitable property valuation. For property purchases in Scotland, we can normally use the property valuation contained in the sellers Home Report as long as it is no more than 3 months old. Maximum Loan: We can lend up to 90% of the purchase price or property valuation (whichever is lower). The minimum loan size is 50,000 and the maximum is 300,000. Term: Applicants must be at least 18 years old on application and the maximum age at the end of mortgage term is normally 70. Minimum mortgage term is 5 years and maximum term is 40 years. The parent(s) acting as guarantor must not be older than 65 at the time of application, and be able to provide confirmation of a sustainable income stream into retirement (if appropriate). How much can I borrow? All mortgage applications are based on affordability. As a guide we will lend on the applicant(s) income up to: Main income x 4, plus second income x 1 OR Joint income x 3. Monthly payments on the difference between the affordable amount, calculated as above, and the required loan may be met by a monthly parental contribution (see below). Parental Support: We require a Letter of Support from the parent(s) making the monthly contribution to mortgage payments. 9

11 Parental Support (cont d) As responsible lenders, when considering the application we assess the financial position of both the applicant and the parent(s) giving support. The annual income of the parent(s) giving support must be at least 30,000, and must be sufficient to cover the support plus any existing mortgage or finance commitments they have in their own name. Any existing financial commitments of both the applicant and the parent(s) will be taken into consideration when affordability is calculated. Repayment: Capital and Interest Interest only available up to 75% of the property value or purchase price (whichever is lower) subject to the maximum loan size of 300,000. We will ask for confirmation that the borrower has an appropriate repayment vehicle in place at the time of application as well as periodically throughout the life of your mortgage. Acceptable repayment vehicles are endowment policies; stocks and shares ISAs; pension lump sums; and second/investment properties (See Page 34 for full information). Security: Security for any mortgage granted will be as follows: 1. A first charge will be taken over the property being purchased as security for the mortgage lending. 2. Parental Letter of Support for monthly payments required to support any borrowing above normal affordability on the applicants own income. 3. Parental Guarantee from the parent(s) acting as guarantor for borrowing in excess of 70% of the property value or purchase price (whichever is lower). 4. Please note the guarantee could be for a limited amount or to cover the full mortgage. It is a requirement that the guarantor takes independent legal advice to ensure they fully understand the legal obligation of providing a guarantee. Flexible Features: Where Early Repayment Charges apply to any of our mortgages you may be allowed to make overpayments (normally up to 10% of the loan amount per annum) without penalty. Insurances: Buildings Insurance must be arranged prior to funds being released. 10

12 Self-Build Mortgages Scottish Building Society offers mortgages for people looking to build their own home. Key Features of our Self Build Mortgage: Suitable for: Release of funds: People looking to build their own residential property in Scotland. For a self build mortgage, funds are released in stages after each section of work is complete. The list below is a typical example of how this might happen but we can be flexible, depending on the type of build and the applicant s circumstances: Purchase of land (when full planning permission received) Foundations laid Up to eaves level Wind and watertight and roof tiled Interior walls complete (plastered out) Ready to move in Each tranche of funds is released when confirmation is received from our Valuer that the stage has been completed to a satisfactory standard. If the construction is being supervised by an architect then they will also have to issue an interim certificate. The property build must be carried out by a builder registered with the National House Building Council (NHBC). Alternatively, the build must be covered by NHBC Solo or the borrower must employ an architect or a RICS qualified surveyor with professional indemnity insurance to supervise the build. If the build is on an all trades basis we will require a suitably professionally qualified project manager to supervise the project and budget. Maximum Loan: We will lend up to 80% of the total cost of the land and construction cost (whichever is lower) for loan amounts up to 300,000. The value of the land, if already owned and debt free, may be included in the borrower s contribution. We would normally expect to see a cash contingency of 10% of the total build costs to be available. 11

13 Term: How much can I borrow? Applicants must be at least 18 years old on application and the maximum age at end of the mortgage term is normally 70. Minimum mortgage term is 5 years and maximum term is 40 years. All mortgage applications are based on affordability. As a guide we will lend up to: Main income x 4, PLUS second income x 1 OR Joint income x 3. Any existing financial commitments will also be taken into consideration when affordability is calculated. Repayment: Capital and Interest. Interest only. During the build of the property, the mortgage can be on an Interest Only basis but must be converted to a Capital & Interest repayment mortgage on completion of the build if the borrower does not already have a suitable repayment vehicle in place. Acceptable repayment vehicles are endowment policies; stocks and shares ISAs; pension lump sums; and second/investment properties Security: Flexible Features: Insurances: A first charge will be taken over the land and property being built as security for the mortgage lending. Where Early Repayment Charges apply to any of our mortgages the borrower may be allowed to make overpayments (normally up to 10% of the loan amount per annum) without penalty. You must ensure specialist self build insurance is in place prior to commencement of the project. We have seen an upturn in self-build lending and, as one of the few lenders in this area, our mortgage intermediaries like being able to discuss cases on an individual basis whether it s on the phone, in the branch or their own office. Our experienced and knowledgeable staff have been involved in self-build lending for a number of years and have built up a vast knowledge of the self-build market Neil Walker, Area Manager, North of Scotland 12

14 Buy to Let Scottish Building Society offers a Buy to Let mortgage for people buying or re-mortgaging a property to rent out. Key Features of Mortgages for People Buying a Property to Rent Let Suitable for: Property: Purchasers of residential property throughout Scotland to rent out. All mortgages are subject to a suitable property valuation. For property purchases in Scotland, we can normally use the property valuation contained in the sellers' Home Report provided that it is no more than 3 months old (please speak to our mortgage advisors for further details). Maximum Loan: Maximum loan on a single property is 250,000. Minimum Loan: Minimum loan on a single property is 50,000. Term: Applicants must be at least 18 years old on application and normally not more than 70 at end of mortgage term. Minimum mortgage term is 5 years and maximum term is 25 years How much can I borrow? Maximum loan 75% of lower valuation or purchase price. Rental income must be more than 130% of the monthly mortgage payment. Rental income must be verified by the valuer or by a letter from a letting agency addressed to the Society. Minimum income (non property related) for one applicant must exceed 25,000 Maximum number of bedrooms - 4 Maximum number of Buy to Let Properties with the Society - 3 Overall maximum Buy to Let lending with Society, should not exceed 500,000. Interest Rate: Repayment: Remortgage Incentives: Please see Interest Information pages on the website. Capital and Interest or Interest Only. On Interest Only we will accept the sale of the Rental property as the repayment vehicle. Valuation costs: A valuation of your property will be required as part of the mortgage application. The cost of this will be met by the Society in line with our scale of fees.any other valuation requirements should be discussed with the valuer direct and the customer will have to meet the additional cost. 13

15 Remortgage Incentives (cont d) Security: Flexible Features: Insurances: Free Basic Legal Service the solicitor we choose will act solely for the Society in the transfer of the mortgage and any additional legal services of advice you may require will be at your own expense. If you wish to use your own solicitor instead, the Society will contribute 150 towards your legal costs. A first charge will be taken over the property being purchased as security for the mortgage lending. We will require sight of a Short Assured Tenancy Agreement for a minimum of 6 months/maximum 12 months. Where Early Repayment Charges apply to any of our mortgages you may be allowed to make overpayments (normally up to 10% of the loan amount per annum) without penalty. Buildings Insurance must be arranged prior to funds being released. Our advisers can provide competitive quotations for buildings insurance and also life cover. You are not required to arrange these or any other insurances through Scottish Building Society. Scottish Building Society is an excellent lender to use. They have a very open view on underwriting and a common sense approach which can be invaluable in the current climate. Gary McCleary, IFA 14

16 Lifetime Mortgages Scottish Building Society offers a Lifetime Mortgage for people aged 65 and over who are looking to release some equity from their home. Key Features of our Lifetime Mortgage: Suitable for: Property: Maximum Loan: Homeowners over the age of 65 looking to release equity from their property in Scotland. Our Lifetime Mortgage may also be suitable for people looking to raise funds to buy the property they currently rent from a Local Authority or Housing Association. Mortgages are available for owner occupied residential properties. All mortgages are subject to a suitable property valuation. We will lend up to a maximum of 35% of the property valuation or purchase price (whichever is lower). The minimum loan size is 30,000 and the maximum is 300,000. Term: How much can I borrow? The minimum age at time of application is 65. For joint applications, both applicants must be aged at least 65. There is no maximum age. All applications are treated on an individual basis and based on affordability. The maximum lend is generally determined by the applicants income, which can include their pension. As a guide we will lend up to the following: Single Applicant 3.5 X income Joint Applicants 3.5 X first income plus 1 X second income OR 2.75 X joint income. Any existing financial commitments will also be taken into consideration when affordability is calculated. Please note in joint applications the last survivor needs to be able to demonstrate serviceability. If the property is in joint occupancy we will not lend in a sole name. Both occupiers should be party to the mortgage and fit the age and income requirements. Remortgage Incentives: Contribution to Legal Fees: The Society will contribute 150 towards the cost of the borrower s legal costs. Repayment: Refund of Valuation Costs: A valuation of your property will be required as part of the mortgage application. The cost of this will be met by the Society in line with our scale of fees.any other valuation requirements should be discussed with the valuer direct and the customer will have to meet the additional cost. Our Lifetime Mortgage is set up on an Interest Only basis with no repayment vehicle being required. The mortgage is normally not repayable until the borrower (or the last survivor if it is a joint application) has died, moved into long term care or 15

17 moved home. Repayment (cont d) Security: Flexible Features: Each month you are required to make a payment to cover the monthly interest on the mortgage. By doing this the capital balance of the mortgage will never increase. A first charge will be taken over the property being purchased or remortgaged as security for the mortgage lending. The borrower may make overpayments on the mortgage to reduce the capital. If this is during the initial period where Early Repayment Charges apply they may repay up to 10% of the capital balance of the mortgage each year without penalty (See Page 32 for further information). Once any period where Early Repayment Charges are applicable has elapsed the borrower may make capital reductions without limit or penalty to reduce the balance of the loan. Insurances: Buildings Insurance must be arranged prior to funds being released. 16

18 Guest House Mortgages Scottish Building Society offers mortgages for people looking to buy or remortgage a Guest House or Bed and Breakfast in Scotland. Key Features of our Guest House Mortgage Offers: Suitable for: Property: People looking to buy or remortgage a Guest House with up to 6 letting bedrooms, and a maximum of 9 bedrooms overall. Mortgages are available for Guest Houses which are to be occupied by the borrower and with a maximum of 6 letting bedrooms, and a maximum of 9 bedrooms overall. All mortgages are subject to a suitable property valuation. For property purchases in Scotland, we can normally use the property valuation contained in the sellers Home Report as long as it is no more than 3 months old. Maximum/ Minimum Loan: We will lend up to a maximum of 75% of the property value or purchase price (whichever is lower). For remortgages, the minimum loan size is 30,000. Maximum loan size - 350,000. Term: Applicants must be at least 18 years old on application and a maximum age at the end of the mortgage term is normally 70. Minimum mortgage term is 5 years and maximum term is 35 years. How much can I borrow? All applications are dealt with on an individual basis with the amount of the mortgage dependent upon the circumstances of the applicant. The following information will be required to assess any application: When the borrower is buying or remortgaging an existing Guest House we will require 3 years trading accounts for the business. If starting a new business, or believe an existing business has scope for increased trading, then we will require a cash flow forecast and business plan to support this. Details of the applicants previous business experience if any. Details of any continuing employment or income that the borrower has, in addition to the Guest House business. Any existing financial commitments will also be taken into consideration when affordability is calculated. Remortgage Incentives: Free Basic Legal Service: When remortgaging a Guest House property to Scottish Building Society we will provide the borrower with a free basic legal service which means they won t have any solicitor s fees to pay. However, the solicitors we use will act only for the Society in the transfer of the mortgage and if the borrowers require any additional services these will require to be paid by the borrower. 17

19 Remortgage Incentives (cont d) Repayment: Security: Flexible Features: Insurances: If they would prefer to use their own solicitors then the Society will contribute 150 towards the cost of this. Refund of Valuation Costs: A valuation of the property will be required as part of the mortgage application. The cost of this will be met by the Society in line with our scale of fees.any other valuation requirements should be discussed with the valuer direct and the customer will have to meet the additional cost. Capital and interest Interest Only. Repayment of the mortgage can be by sale of the Guest House business. A first charge will be taken over the property being purchased or remortgaged as security for the mortgage lending. Where Early Repayment Charges apply to any of our mortgages the borrower may be allowed to make overpayments (normally up to 10% of the loan amount per annum) without penalty. Buildings Insurance must be arranged prior to funds being released. Connelly & Yeoman are pleased to use Scottish Building Society because of the friendly, accessible service offered Phil Manson, Connelly & Yeoman 18

20 Section 2: Fully Packaged Case An application is considered to be fully packaged where: All standard documentation requirements are met. All additional documentation requirements are met for self-build, additional loans, guest house and guarantor cases. Standard Documentation Requirements 1. Fully completed and signed original mortgage application. All fields must be completed. Please note the application form or decision in principle forms can be downloaded from our intermediary website and can be found under Mortgage Forms. 2. Most recent 3 months payslips and most recent P60 (latest payslip should not be more than 1 month old at application date and P60 must be the most recent). If regular overtime is being used, the previous P60 should also be obtained to confirm that the overtime has been a regular feature. 3. If the applicant is self employed, the most recent 3 years accounts, signed by a suitably qualified accountant or SC60s are required. The most recent year s accounts should be no more than 18 months old. Draft accounts can be used if the final accounts have not been prepared. 4. Most recent 3 month s bank statements showing salary credits and monthly outgoings (latest statement must not be more than 1 month old at application date). 5. Valid ID, preferably passport or driving licence. 6. Evidence of deposit ie bank/savings statement. If the deposit is being gifted by a family member a signed letter from the family member must be provided, confirming that it is in fact a gift and is non repayable. (The evidence provided must not be more than 1 month old at application date). Additional Documentation Requirements Self-Build 1. Standard Documentation Requirements, plus 2. Costings form completed in full. 3. Copy of valid planning permission and building warrant if available. 4. Details of supervising architect, a letter confirming the supervision of the build and a copy of the architect s professional indemnity insurance. 5. Evidence of cash savings as contribution to the build and cash flow projections. 19

21 6. Estimates and quotations for all aspects of the build. 7. Where there are various contractors then details of the person managing the project must be provided, including a note of their professional qualification. 8. Certification from the builder or the suitably qualified project manager of the funds required at each stage of construction. 9. Appropriate site insurance documentation should be exhibited, together with confirmation of the relevant parties professional indemnity insurance. 10. A Mortgage Valuation report of the property to be constructed, covering present and projected (when finished) value. Additional Loan Applications 1. Standard Documentation Requirements, plus. 2. Estimates/Quotations for any major home improvements being carried out. 3. When the additional loan is required due to self build shortfall of funds, details of why and where the shortfall has occurred with estimates/ invoices for the work still to be carried out. 4. When the additional loan is for debt consolidation copies of the most up to date statements for the debts to be repaid are required. 5. Any additional borrowing required for capital raising must be detailed/ evidenced where appropriate to ensure that the Society is following its responsible lending policy, for example the credit card statement or loan settlement figure from the loan provider. Guarantor Applications 1. Standard Documentation Requirements for all applications for both applicant and guarantor(s). 2. Fully completed guarantor application form. Lifetime Applications 1. Standard Documentation Requirements. 2. Evidence of the monthly income from the Benefits Agency and/or a private pension provider. 3. Evidence of any other sustainable income to be used in the calculation from the applicant s accountant. 4. Passport and/or driving licence to verify age of all applicants. 5. Copy of the introducer Lifetime qualification will be required. 20

22 Guest House Applications 1. Standard Documentation Requirements 2. A full business case for the Guest House business venture, including (as a minimum): Details of the applicant s previous business experience. Details of any continuing employment or other income. 3 years trading accounts (for either the applicant s previous business, or for the guest house being purchased/ remortgaged). A cash flow forecast for the next 12 months. Projected accounts for the next 12 months. Details of local competition. (We can provide a draft business plan template if required) 21

23 Section 3: Extracts from Current Lending Policy Standard Criteria for Mortgages As a responsible lender, Scottish Building Society will only consider mortgage applications on a fully advised basis, with a full assessment of both the applicants past credit record, and their ability to meet current and future financial commitments including their mortgage payments and other related expenditure. The following criteria are the minimum requirements that must be satisfied for applicants to be eligible for an owner-occupier mortgage. Any lending to applicants outside the standard criteria requires prior approval. We would recommend that a Decision in Principle (DIP) form is submitted to the branch for consideration. (The DIP form can be found in the intermediary website under mortgage forms ) Maximum Number of Borrowers on an individual mortgage LTV Maximum Number of Borrowers Maximum Incomes for Affordability Calculation 80% 4 3 > 80% 4 2 Age Criteria The minimum age of all parties to a mortgage at inception is 18, with the exception of Lifetime Mortgages, where the minimum age of all parties to the mortgage is 65. The maximum age at the end of the mortgage term is normally 70. If the applicant will be in excess of their expected retirement age at the end of term then affordability using retirement income must be proven. There is no maximum age requirement on Lifetime Mortgage cases. Minimum/Maximum Mortgage Term The minimum mortgage term is 5 years and the maximum term is set in relation to the borrowers expected retirement date, providing the term does not exceed 40 years. There is no maximum term applicable to Lifetime mortgages. Employment Status: Employed applicants must be in permanent employment and have been employed with their current employer for at least 6 months or, if less than 6 months, have been employed immediately before for a minimum of 12 months. Self-employed borrowers (including company directors) must have been conducting their business for a period of at least 2 years and be able to provide evidence of income for that period, together with a projection/estimate of income for the coming 12 months. 22

24 Contractors the Society will not lend in excess of 80% LTV where income is derived from a fixed term contract other than for Medical Professionals e.g. doctors in the NHS. Contractors on a Contracts for Services basis will be treated similarly to self employed applicants in that: 1. Engaged in contracts for at least 3 years. 2. Income evidenced by last 3 years tax assessments with income to have been level or progressively rising. 3. Last 6 months SC60s/715 vouchers to be provided. Confirmation of Sustainable Income Employed applicants For employed applicants, the society may use a combination of earned income (including allowances) and investment income to determine what the applicant s sustainable income will be in the foreseeable future. The following rules regarding additional employment-related income apply: Overtime may be included up to a maximum of 25% of gross basic annual salary; Commission may be included up to a maximum of 25% of gross basic annual salary; Bonuses may be included up to a maximum of 25% of gross basic annual salary; The sum of all additional employment-related income (such as overtime, bonuses, commission, rent allowances, shift allowances, should not exceed 50% of the gross basic annual salary). Self-Employed & Company Directors For self-employed and company director applicants, the calculation of sustainable income will be assessed by the Mortgage Underwriter, having reference to at least one year of financial history (evidenced by either final accounts or an accountant s certificate) and a projection for the coming year. The type of business in which the applicant is employed is likely to have a strong bearing on future sustainability of income. Please note we use different criteria for loans under 80% LTV than for loans higher than 80%. For loans over 80% LTV we insure with a Mortgage Indemnity premium with a specific criteria to be met. Always approachable Mike Davidson, Macleod and MacCallum 23

25 Mortgages up to 80% Loan to Value Employed Borrowers The Society s standard documentation requirements for confirmation of income are that the applicant submits: Their most recent P60 3 recent months payslips (one of which must be for the month prior to application). For mortgages where the borrowing is >80% LTV an employer s reference should be obtained (in writing). These should be in the Society s standard form or on the employer s headed paper. The reference should be signed by a responsible person, who can subsequently be contacted, and include the company stamp, if appropriate. A previous employer s reference should be obtained if the borrower has been in their current employment for less than 6 months. Self-Employed Borrowers (including Company Directors) A completed Accountant s Certificate covering at least the most recent 3 completed years, and obtained from an approved accountant, will be accepted for borrowers who are selfemployed. For mortgages with an LTV > 80% the certificate may only be signed by an accountant with one of the following professional qualifications: Acceptable Accountants Qualifications CA ACA/FCA ACCA/FCCA AAPA/FAPA AIA ACMA/FCMA AFA/FFA MAAT/SAT ACEA/FCEA ATT ACPA/FCPA The Institute of Chartered Accountants of Scotland The Institute of Chartered Accountants in England & Wales or the Institute of Chartered Accountants in Ireland The Chartered Association of Certified Accountants Association of Authorised Public Accountants Association of International Accountants The Chartered Institute of Management Accountants The Institute of Financial Accountants Association of Accounting Technicians Association of Cost & Executive Accountants Association of Taxation Technicians The Association of Certified Public Accountants If it is not possible to obtain an Accountant s Certificate at least the last 3 years accounts should be obtained. If the applicant submits a self-assessment return to HMRC, copies of the last 3 tax calculation forms (SA302) issued by HMRC should be obtained. Where the applicant only has a 2 year track record, an estimate/projection for the coming year may be used in conjunction with the 2 previous years as long as 1) annual turnover is level or progressively rising; 2) net profits are level or progressively rising; and 3) the applicant s drawings do not exceed the share of net profit for any accounting period. 24

26 Mortgages over 80% Loan to Value For applications in excess of 80% Loan to Value the Society requires Higher Lending Charge Guarantee Insurance, the following calculations are employed to determine an applicant s sustainable income: Employed Applicants For employed applicants, we may use a combination of earned income (including allowances) and investment income to determine what the applicant s sustainable income will be in the foreseeable future. The following rules regarding additional employmentrelated income apply: Overtime may be included up to a maximum of 25% of gross basic annual salary; Commission may be included up to a maximum of 25% of gross basic annual salary; Bonuses may be included up to a maximum of 25% of gross basic annual salary; The sum of all additional employment-related income (such as overtime, bonuses, commission, rent allowances, shift allowances etc) should not exceed 50% of the gross basic annual salary. Self-Employed Applicants For sole trader/partner the average share of the last 3 years net trading profit. Where the applicant has only a 2-year track record, an estimate/projection for the coming year may be used as long as: 1. Annual turnover is level or progressively rising 2. Net profit per the accounts (and share of net profit) is level or progressively rising 3. The applicant s drawings do not exceed the share of net profit in any accounting period. Company Directors For Directors of a limited company the average salary/dividend for the last 3 years. Where the company has only a 2-year track record, an estimate/projection for the coming year may be used as long as: 1. Annual turnover is level or progressively rising 2. Net profit per the accounts is level or progressively rising 3. Salary plus gross dividends are level or progressively rising. 25

27 Affordability Assessment & Income Multiples One of the key elements of the Mortgage Market Review is the requirement that a lender must not enter into a transaction unless it can demonstrate that the mortgage is affordable. At Scottish Building Society we pride ourselves that this is the way we have traditionally assessed mortgage applications. The Society s approach to affordability assessment will continue to reflect the bespoke nature of its underwriting, utilising the expertise of experienced underwriters on a case by case basis. The Society will only approve mortgage applications which are deemed to be affordable, taking into account the individual circumstances of the borrower/s. The Society will require a fully completed income and expenditure form to be completed in the application form by the applicant so we can properly assess affordability as outlined under Mortgage Market Review (April 2014). Income multiples are published by the Society as a general guide to how much an applicant may borrow should their application satisfy the Society s more bespoke affordability criteria. Current income multiples are shown in the following table. LTV Single Applicant Joint Applicants > 80% 3.5 x income 3.5 x first applicant s income + 1 x second applicant s income OR 2.75 x joint income 80% 4 x income 4 x first applicant s income + 1 x second applicant s income OR 3 x joint income Mortgage/Rental Payments: If the conduct of the existing mortgage cannot be verified via bureau data, the following documentary evidence should be obtained: Bank or mortgage statements, which largely cover the 12-month period prior to application, or a lender s reference; For first-time buyers where the borrower is living in rented accommodation provided by a housing association or local authority, the following documentary evidence of rental payments should be obtained: - Bank or rental statements, which largely cover the 12-month period prior to application, or a lender s reference. 26

28 Applicants with Impaired Credit History Applicants with impaired credit history may be considered under certain circumstances. The rules may be segmented into the following sections: 1. Unacceptable 2. Acceptable Unacceptable Credit History Where any party to the application: Is an undischarged bankrupt, or has been discharged from bankruptcy within the past 3 years; Is subject to an Individual Voluntary Arrangement (IVA), or has been discharged from an IVA within the past 3 years; Has previously had their property repossessed (including voluntary surrender of keys); Has more than 2 Court Decrees, CCJs or Defaults, even if these have been satisfied or settled; Has had any Court Decrees, CCJs or Defaults within the past 12 months (see below for further clarity); Has one or more Court Decrees, CCJs or Defaults where the total debt was 2,500 or more, irrespective of when it was registered; Has one or more Court Decrees, CCJs or Defaults where the total debt referred to is 500 or more and this/these have been registered in the past 3 years. Acceptable for Consideration Discharged bankrupts of 3 years or more; Applicants discharged from their IVA for 3 years or more; Applicants who have never been more than 3 months or more in arrears in the past 24 months on any existing secured or unsecured loan, and the account has been up to date for at least 6 months provided there is a reasonable explanation for the arrears; The Society will require a full explanation on the circumstances surrounding any default /CCJ noted in the credit file. Satisfied Court Decrees, CCJs and Defaults in accordance with the following table: Maximum Amount Time Since Registered year 500 > 1 year 500 but < 2,500 >3 years 27

29 Voters Roll / Proof of Occupancy: Personal status details including inclusion on the Voters Roll will be checked for all parties to the mortgage (including guarantors) at all addresses within the previous two years. Appropriate proof of occupancy is required if the borrower does not appear on the current Voters Roll. Proof of identity, as required by the current Money Laundering Regulations and the Regulator is also required. Applicants with Other Mortgage Borrowing: The Society will only provide owner-occupier mortgages where the mortgaged property is to be used as the applicant s principal private residence or as a second home for their sole occupation. Other mortgage borrowing, either of a commercial nature or on Buy to Let should be placed on an appropriate product upon completion of the owner-occupier mortgage. As we all know, in this marketplace interest rate is only a small part of the process in placing business. A lender who is willing to look at cases on an individual basis with experienced Underwriters rather than computer scorecards can be worth its weight in gold. David Richardson, Area Manager, Glasgow & West 28

30 Foreign National Applicants Employment status Minimum Time in UK Maximum LTV Permanently Employed Self employed Company Director 5 years 80% Contractors 3 years 80% Permanently Employed 3 years 65% Expatriates The Society will normally consider owner-occupied mortgages for expatriates, provided: There is a track record of income paid into a UK bank account Partner or family will reside in the property The applicant can provide justifiable assurance that either he or she will move into the mortgaged property within 3 years from the date the mortgage is drawn Suitable arrangements are made either for the property to be let or suitably managed during their absence. Any other scenarios will need to be referred to your local area office for consideration. Why I use Scottish Building Society: Competitive rates Ease of contact Good service The ability to talk through an application before processing Friendly service Speed of completion Excellent after service Good rates when deal ends Malcolm Scott, Munro & Noble Financial Services 29

31 Debt Consolidation The Society will consider lending funds for debt consolidation as additional borrowing either by remortgage to the Society or by way of a Further Advance for existing Society borrowers. The maximum Loan to Value permitted when there is an element of debt consolidation is 80%. Lending for Debt Consolidation will only be permitted once during the term of the mortgage. Debt consolidation will be considered in the following circumstances: - Applicant(s) must be in sound employment. - The debt being consolidated is a small percentage of the total mortgage borrowing. - It is clear and evidenced that the applicants overall financial position will be improved. The Society will not consider debt consolidation for a habitual consolidator using finance to fund a lifestyle that their income cannot support. Where the debt consolidation exercise is to repay credit card debt it would be expected that all accounts will be cleared with the additional funds. Partial repayment of credit cards will not normally be considered. A detailed explanation from the applicant(s) is required to establish why the debts occurred and clear details of the debts to be repaid. When a remortgage to the Society includes an element of debt consolidation, a Special Condition will be inserted into the Mortgage Offer requiring that the debt is repaid in full on completion of the remortgage. When debt consolidation is required by way of a Further Advance the Society will insert a Special Condition into the Mortgage Offer to ensure the borrower provides evidence that the debt has been repaid within a reasonable time. The Society s branch will follow up to ensure it is received. As we don t use automated credit scoring systems we are well placed to consider the full details of your client s mortgage requirements Douglas Sharpe, Area Manager, Aberdeen 30

32 Assisted House Purchase Schemes The Society recognises that home ownership is only available to some borrowers on low and moderate incomes through their participation in certain assisted house purchase schemes. The Society currently participates in the following schemes: 1. UK Government Right to Buy Scheme, which enables tenants to purchase their properties at a discounted price. 2. Scottish Government LIFT (Low-cost Initiative for First-Time Buyers) Scheme, which is a shared-equity scheme, split into the following categories: The New Supply Shared Equity Scheme (NSSE), which allows first-time buyers to buy a new build property from a housing association or from a private housebuilder; The New Supply Shared Equity Scheme with Developers (NSSED), which is a variant of the NSSE Scheme, where the equity is split equally between the developer and the Scottish Government; The Open Market Shared Equity Scheme (OMSE), to allow first-time buyers to purchase a property on the open market in areas where affordability is a key problem for buyers. Armed Forces Help to Buy Scheme, to allow members of armed forces to qualify for a deposit to purchase a property as a new main residence 31

33 Maximum Loan to Value & Scheme Details In each of these schemes, the Society obtains a first standard security over the mortgaged property, with a second charge granted in favour of the provider/s of the additional finance under the LIFT Scheme. The following table summarises the maximum LTV the Society will lend under each scheme, together with details of the contribution required from the borrower, and the term over which the equity loan (if applicable) is repaid: Scheme Equity Loan Borrower Contribution Right to buy N/A (Discounted Purchase Price) Nil (Current Tenant) Max LTV 100% of the purchase price if this does not exceed 80% of market value NSSE 20% to 40% of the full purchase price repayable over 19 years; or from the sale proceeds when the house is sold (if earlier) 2.5% of discounted purchase price 97.5% of the discounted purchase price if this does not exceed 80% of the open market value of the property NSSED 20% to 40% of the full purchase price repayable over 15 years; or from the sale proceeds when the house is sold (if earlier) 2.5% of discounted purchase price Same as for NSEE OMSE 20% to 40% of the full purchase price repayable over 19 years; or from the sale proceeds when the house is sold (if earlier) 2.5% of discounted purchase price Same as for NSEE FHTB (Forces Help to Buy) Maximum 25,000 or 50% of annual salary whichever is the lower. To be repaid over a period no longer than 10 years commencing a maximum of 6 months after the advance being made Minimum 5% 80% 32

34 Valuation of New Builds The Society recognises that the initial value of newly built, converted or renovated residential properties is likely to reflect a premium due to the fact they are being occupied for the first time. For the purposes of this policy, these properties are collectively termed, new builds. When assessing the value of new builds the Society takes comfort from the fact that the appropriate Disclosure of Incentives form (provided by the builder/ property developer to the valuer) has been taken into account in the valuation provided. On a new build house the maximum borrowing is 90% On new build flats the maximum borrowing is 85% Buy to Let Properties: The maximum LTV on newly built, converted, or renovated Buy to Let property is 75% As we have always insisted on receiving proof of income etc., MMR will not affect our service standards, unlike many of our competitors. We will continue to offer a slick, professional service to our intermediaries with local Area Managers on hand to discuss individual cases as a key driver to the process. Coupled with our competitive products I believe the Society has a winning formula. Derek Christie, Area Manager, South West 33

35 Interest Only Mortgages The Society recognises the risks associated with owner-occupied Interest-only mortgages, and will only permit lending on this basis if there is a credible plan for repayment of the capital sum at the end of the mortgage term. Basic Criteria All requests on owner-occupier mortgages for lending on an Interest-Only basis, either at inception or during the term of the mortgage, must meet the following criteria: Maximum Loan to Value Ratio 75% Maximum Loan Size 350,000 Acceptable Repayment Vehicles The Society will accept the following repayment vehicles: Endowment policies, where the projected growth rate at 4% will generate sufficient to repay the mortgage borrowing. Any shortfall in projected growth is currently placed on a capital repayment basis. Stocks & shares ISAs are acceptable as long as we receive a letter from the ISA provider, stating that the projected value at maturity is sufficient to allow full repayment of the mortgage. Pension lump sums are acceptable provided the projected lump sum at 4% growth is sufficient to repay the mortgage in full. Second / Investment properties are acceptable provided the following rule is used: 1. For mortgages maturing in > 5 years, the current equity in the second property must be sufficient to repay the mortgage; and, 2. For mortgages maturing within 5 years, the current equity in the property must be no less than 120% of the mortgage. Any monthly contribution in respect of these repayment vehicles must be included in the affordability calculation. 34

36 Lending into Retirement The Society will consider mortgage applications where the term extends beyond the Borrower s expected retirement age, up to normal maximum age 70, where the borrower can clearly demonstrate a sustainable income stream to ensure the Mortgage continues to be affordable. The Society will take a prudent and proportionate approach to assessing the customer s income beyond retirement date. The degree of scrutiny to be adopted may vary according to the period of time remaining to retirement when the assessment is made. The closer the customer is to retiring, the more robust the evidence of the level of income in retirement should be. For guarantor cases, where the personal guarantor is making a contribution towards the mortgage payments, an appropriate affordability assessment will be conducted, in line with the above. All cases will be individually underwritten. Maximum Age The maximum age permitted at the end of the mortgage term varies, depending upon product. All cases where there is lending past an applicant s expected retirement age must be referred for approval.. The following table states the borrower s maximum age where the Society would normally expect the borrowing to be repaid: Product Owner-Occupier Commercial (incl. Guest Houses) Buy to Let Lifetime Normal Maximum Age No Maximum Any exceptions will require prior approval. 35

37 Section 4: Product Criteria Self Build Criteria Please see below the criteria for the Society s self build product. Maximum loan ( 300,000 at 80% LTV). The maximum LTV is determined by the sum required as a percentage of the lower of the total cost of construction (including purchase of plot) or the valuation of house upon completion. Where the land is gifted to the borrower, the value of the land may be included in the total cost of construction and in the borrower s financial contribution. There should be a contingency equal to 10% of the build costs built into the calculation. The property must be located in Scotland. The borrower contribution must be used prior to any funds being advanced by Society. The property must be constructed with the benefit of one of the following: 1. NHBC Buildmark Guarantee 2. NHBC Solo Guarantee 3. A supervision certificate issued by a suitably qualified architect, who must have professional indemnity insurance of the great of either: The value of the property (once completed), or 250,000 if employed directly by the borrower, or 500,000 in any other case Properties covered by other building guarantees may be considered by the Society on an exceptional basis. Properties may be constructed by either: 1. a single builder on a fixed price contract, or 2. on an all-trades basis under the direction of a suitably qualified project manager Where a single builder is employed, investigations will be conducted to ensure that the builder is considered both reputable and financially sound. These can be ascertained through a combination of local knowledge, and by requesting sight of their most recent accounts (if required). For limited companies undertaking the work a commercial search may also be carried out to ensure there is no adverse credit information. We do not fund projects where a group of individuals from different trades have an agreement to work as a team and build houses for each other, as lenders have found these carry a higher risk of non-completion. 36

38 A copy of the builder s contract or detailed costs for each stage of construction is required for inspection by the Society s mortgage underwriters. Stage Payments will normally be released at the following stages of construction: Stage 1: Purchase of the plot Stage 2: Foundations laid (and timber kit purchased, if applicable) Stage 3: Kit erected (if applicable) Stage 4: Wind and water tight (roof, windows and doors installed) Stage 5: Plastered out (electrics, joinery, plumbing, and external building work completed Stage 6: Completion (internal fitting, e.g. bathroom, kitchen, and central heating installed) A revaluation of the property by a suitably-qualified professional valuer, and a certificate from either NHBC or the supervising architect are required at each stage. The sum released at each stage must not exceed the maximum LTV ratio, based on the lower of: 1. the cost of construction to date 2. the valuation in current condition Before any funds are released the Society requires the borrower to grant a Standard Security over the plot on the clear understanding that no subsequent charges will be granted over the plot without the Society s permission. Appropriate insurance, including contractors all risks and public liability insurance, must be arranged before the project commences. This must be inspected by the Society before any funds are released. The final stage payment can be released before the property is fully complete if it is substantially finished: i.e. only minor finishing works are required, and the lending does not exceed the maximum agreed LTV. 37

39 Buy to Let Mortgages The following criteria apply to Buy to Let mortgages: Rental cover required is more than 130% of the mortgage payment The applicant (or at least one of the applicants) must have as a minimum, nonproperty related income of 25,000. Investment property must be in Scotland Maximum loan on any single property - 250,000 Minimum loan on a single property - 50,000 Maximum term of mortgage is 25 years Maximum exposure to Society 3 properties (maximum 500,000) Maximum no of bedrooms must not exceed 4 Rental income from valuation or by letter from a letting agent addressed to the Society Property must be let on Short Assured Tenancy All tenants of property must be on the one tenancy agreement Duration of agreement - minimum 6 months and maximum 12 months. 38

40 Guest House Mortgages The Society will consider lending to individuals on its Guest House Mortgage, subject to the following criteria: The property to be mortgaged must be located in Scotland for ease of supervision. The property to be mortgaged must have a maximum of 9 bedrooms in total, no more than 6 of which may be guest rooms. The owner/s must reside in the property. The property must have sole use as a guest house, with no other business use, such as an adjoining restaurant. The maximum mortgage that may be granted is 350,000. The maximum LTV ratio should not exceed 75% of property value or purchase price (whichever is the lower).. The business of running the guest house must be the sole occupation of at least one of the parties to the mortgage. The applicant/s must be able to demonstrate they have the appropriate acumen to successfully run a guest house business. The applicant/s must be at least 18 years old on application, and normally no more than 70 at the end of the mortgage term. Repayments can either be made on a Capital & Interest basis, or on an Interest-Only basis, with full repayment at the end of the term. In today s market place there is definitely a place for firms who deal with cases on an individual basis Sharon Buckland, Area Manager, Edinburgh & East 39

41 Lifetime Mortgages Lifetime mortgages are those where the Society advances funds to older customers (above a specified age) for an unspecified mortgage term, and will not seek full repayment of the borrowing until the occurrence of one of the following: the death of the customer, or in joint cases, the death of the last surviving customer; the customer leaves the mortgaged property to live elsewhere and has no reasonable prospect of returning (for example by moving into residential care); the customer acquires another dwelling for use as their main residence; the customer sells the mortgaged property; the Society exercises its legal right to take possession of the mortgaged property due to a breach in the mortgage conditions. the Society will consider lending to individuals on Lifetime Mortgages, subject to the following criteria: The mortgaged property must be located in Scotland for ease of supervision. The maximum mortgage that may be granted is 300,000 at an LTV ratio of 25%. The LTV ratio should not exceed 35%. Any requests outside this criteria should be referred up front by completing a Decision in Principle (DIP) form. Excesses, as above, will only be considered for high net worth individuals where the purpose of the advance is tax planning. The minimum age of the youngest applicant is 65. Please note if the property is in joint occupancy we will not lend in a sole name. Both occupiers should be party to the mortgage and fit the age and income requirements. As the Society requires the borrower/s to make payments of accrued interest on a monthly basis, an affordability calculation is conducted, with particular care taken to any changes that might affect future affordability. The mortgage term is based on the mortality table on Page 41. The term is set initially to age 90 and then reviewed if appropriate. Excellent local service and efficient administration Roy McLennan, Aberdeen Provident Services 40

42 Guide to Mortgage Term for Lifetime Mortgages Mortality table: Age (Female) Term Age (Male) Term Over Over

43 Further Advances A Further Advance is a sum advanced to an existing borrower in addition to their current residential mortgage balance. Included in this definition are instances where the borrower is seeking to re-draw overpayments previously made to the mortgage, either through regular overpayments, or by capital sum. The Society will consider advancing funds in addition to the current outstanding residential mortgage balance to borrowers in accordance with the following policy: The existing mortgage must have completed more than 6 months ago; The Society should have a first (and unrestricted) charge over the borrower s residential property; The new total mortgage amount must meet the Society s minimum requirements in terms of affordability; All standard status requirements (such as credit history, and maximum age) must be satisfied; The maximum Loan to Value ratio permitted will be determined by the purpose of the further advance, as follows: Purpose Max LTV Expenditure on Property 90% Capital Raising 85% Debt Consolidation* 85% Business Purposes 80% * Lending for Debt Consolidation will only be permitted once during the term of the mortgage. Should the LTV of the total new debt exceed 80% LTV, any existing mortgage indemnity insurance will be cancelled, and fresh cover arranged. A fresh valuation will be required to support the Further Advance application where: The current balance outstanding plus the amount of the further advance exceeds 80% of the previous valuation; or The previous valuation was carried out more than 5 years prior to the further advance application and the new total lending exceeds 60% of the previous valuation; or The Mortgage Underwriter considers a fresh valuation is appropriate. NB: Further Advances under Lifetime Mortgages will be restricted by the overall Lifetime Mortgage LTV of 25%. 42

44 Applications over 80% LTV Unless otherwise indicated a higher lending charge (HLC) is normally applied to mortgages over 80% LTV. The following rates apply: LTV Charge per 100 of loan amount in excess of 80% Over 80% up to 85% 5.50 Over 85% up to 90% 6.50 Over 90% up to 95% 8.00 The HLC can be added to the mortgage subject to the total loan not exceeding 95% LTV. To qualify for MIG the application must fit the Society s Lending Policy and also meet the following specific requirements. 1. The maximum mortgage is 3.50 x prime income plus 1.00 x 2 nd borrowers income or 2.75 x joint incomes. 2. The Society is required to obtain employer s references including a previous employer s reference if the applicant has been in the current employment for less than 6 months. 3. If an existing mortgage cannot be verified by the credit check the Society is required to obtain bank/mortgage statements, covering a full 12 month period prior to application, or a lenders reference. 4. Where the applicants are living in rented accommodation the Society is required to obtain bank/rental statements, covering a full 12 month period prior to application. A dedicated point of contact in our local branches maintains that focus on customer service and personal touch. Alex Moffat, Area Manager, Borders 43