Mortgage lending criteria

Transcription

1 Mortgage lending criteria This document is for use by FCA authorised intermediaries only 14 March 2018 Looking for help? Call +44 (0) Visit

2 Lending criteria index Personal details 3 Credit history 3 Loan details 3 Re-mortgages 3 Employment 4 Income treatment 4 Contractors 6 Self-employed 6 Lending into retirement 7 Commitments 7 Interest only 7 Second homes 8 Property 8 Further Advance 10 Porting Products 10 Glossary 10 2

3 Personal details Minimum age 18 years for residential. Maximum age As guidance, the maximum age is 85 years at the end of term. Terms that take the customer beyond the age of 85 will be considered subject to individual underwriting and the application meeting the Bank s affordability requirements. For further guidance please refer to Lending into Retirement. Address history All applicants must have a 2 year UK address history. Number of applicants Maximum of 2. Residency All applicants must have permanent rights to reside in the UK. We will consider applications up to 75% LTV where applicant has a work permit/visa with at least 2 years remaining. Guarantors Joint mortgage sole title Accepted for close family members. Independent legal advice required for the party not on the deeds. Credit history Adverse credit Credit check Credit reference agency Decision in principle All borrowers must have a clean credit history with: No CCJ s/no defaults No history of bankruptcy, DMP s, DRO s, or IVA s within the last 6 years No repossessions No unsecured or secured loan arrears in the past 12 months No payday loan usage in the last 12 months Credit search. Equifax Soft footprint. DIP Valid for 30 days. Loan details Minimum term 5 years Maximum term Capital Repayment - 35 years for main residence Capital Repayment 25 years for second home Interest Only (Part & Part) - 25 years Minimum loan 100,000 Maximum loan/ltv 80% to 1,000,000 Capital and Repayment 70% 1,000,001 to 2,000,000 60% where loan greater than 2,000,001 no maximum loan amount on residential loans. Maximum loan/ltv 60% to 1,000,000 on residential. Interest only and Part & Part Lending into retirement 80% LTV(Capital & Repayment) Lending in retirement Second homes Deposits 75% LTV (Capital & Repayment) where applicant already retired or lending beyond 85 years of age. (beyond 85 by referral) 70% LTV Builders cash incentives allowed up to 5% of purchase price/valuation otherwise Deposit must be from own resources unless gifted by a close family member. Re-mortgages We may allow the donor to reside in the mortgaged property subject to receiving Independent Legal Advice. Day1 re-mortgages Can be considered on a case by case basis. Refer to BDM. Capital raising Accepted within standard LTV limits. 3

4 Unencumbered properties Free Legals and Free Valuations Not available for business purposes e.g. buying or putting money in to a business. Capital raising for debt consolidation purposes can be considered up to a maximum of 10% of the property value or 50,000, whichever is lower. The Bank will consider exceptions if there is a reasonable explanation (and supporting evidence) that satisfies the underwriter that a higher figure is appropriate. Where unsecured borrowing has been used for the benefit of the property i.e. to cover the cost of home improvements and the customer can supply supporting evidence, this will not be considered debt consolidation. Treated as a re-mortgage. Free Valuations for re-mortgage customers up to 2M property value. Free Legals for re-mortgage customers up to 1M loan size. Note: solicitor panel used is O Neill Patient. Employment Probationary periods Maternity leave New jobs and pay rises Refer and provide details of previous employment history. Refer and where accepted income will be based on return to work income. Acceptable subject to receipt of employer s reference confirming new salary details and commencement date within 3 months of application date. Income treatment Income Type % Accepted Evidence Required Basic income (Inc. London weighting & car allowance) 100% Latest months payslips (or last 4 weeks where paid weekly); and Latest 3 months bank statements; or Regular Bonus / Overtime /Commission 50% 50% accepted; average of the last 2 years can be used in the affordability assessment. The Bank may consider up to 100% where payments do not represent more than 100% of the customer s basic annual salary and there is no downward variance of 20% or more over the 2 year period. Evidenced by relevant payslips (minimum of 3) and 2 years P60 s or employer s reference. Construction Industry Scheme 100% Latest 3 months payslips; and Contractors Latest 3 months bank statements. Fixed Term Contractors 100% Current and previous contract(s) to cover most recent 12 month period If less than 3 months remaining, evidence that contract will be renewed Latest 3 months personal and business bank statements; 3 months invoices/payslips and P60 (where appropriate) If sub contracts to more than one company or has more than one income source additional information may be required such as company accounts or SA302s. 4

5 Specialist Contractors 100% Current and previous contract(s) to cover most recent 12 month period Latest 3 months personal and business bank statements Investment Income 50% Latest 2 years Tax Returns; and Latest 3 months bank statements. Maintenance Income 100% Court Order; or Assessment letter from Child Maintenance Service (CMS); and Latest 3 months bank statements. New Employment / Pay Rise 100% Latest months payslip Latest 3 months bank statements If new salary not reflected on payslip a letter from employer or employer s reference is required to confirm new salary. Pension (Private or State) 100% Latest months pension payslip; or Pension annual statement; and Latest 3 months bank statements. Rental Income Property already let 100% Last 2 years Tax Calculations (SA302s plus Tax Year Overviews); and/or Last 2 years Business Financial Accounts; where available Second Job 50% Latest months payslip; and Payslip dated 12 months ago; or Employer s reference. Trust Income 100% Where guaranteed for the lifetime of the mortgage. Please provide a copy of Trust Deed. Latest years Tax Return; and Trust agreement. Zero Hour Contract 100% Can be considered where the applicant can provide evidence of a long-term historic sustainable /income position. Must be employed by the same Company for a minimum of 12 months. Refer to BDM Unacceptable income 0% We will not currently accept any income derived from: Bereavement allowance Bursary Carers allowance Child benefit Council tax benefit Disability living allowance DWP or income support Expenses Foster car allowance Housing benefit Lodgers income Piecework contracts Seasonal contracts Temporary contracts Employment paid in foreign currency 5

6 Contractors Fixed/short term/agency contracts Specialist contractor CIS contractors We require the applicant to have been employed on a contract basis for at least 12 months and the current contract must have at least 3 months remaining and/or have the option to renew. Income is to be calculated as a daily rate over 46 weeks or the gross value where agreed as a fixed contract value. Where the customer sub contracts to more than one company or has more than one income source additional information may be required such as company accounts or SA302s. For contractors that earn 500 or more per day or 75,000 per annum, whether employed or self-employed, we will accept the gross value of the contract as income, where agreed as a fixed contract value or calculated as a daily rate over 46 weeks. If the applicant has a Construction Industry Scheme (CIS) contract and the company is paying tax for the applicant, an average of the latest three months income can be used. Self-Employed Self-Employed Type Evidence Required Sole Trader Last 2 years Tax Calculation (SA302s); and Corresponding Tax Year Overview; or Latest 2 year s full accounts; or Accountant s Reference; and Latest 3 months business bank statements; and Latest 3 months personal bank statements. Partnerships with <30 partners Last 2 years Tax Calculation (SA302s); and Corresponding Tax Year Overview; or Latest 2 year s full accounts; or Accountant s Reference; and Latest 3 months personal bank statements. Partnerships or LLPs with =>30 partners Letter issued by Company Finance Director or Accountant which should detail last 2 years earnings and must be dated within 3 months of the application. Latest 3 months personal bank statements. Limited Company A minimum of 2 years financial performance comprising last 2 years full financial audited accounts; or At least one years financial accounts and Accountant s Reference; and Latest 3 months personal bank statements Requirements Minimum 2 years income documentation will be required however we can consider applicants who have been selfemployed for less than 2 years on an individual basis. Mixed employment history in the same occupation can be accepted. Financial accounts must be dated within 18 months of the application. Income treatment Affordability may be assessed using the latest year figures, subject to an assessment of the last 2 years business performance. Lending into retirement Lending Limits 80% LTV Rules Lending into retirement is classed as a loan-term which exceeds the applicants stated retirement age, or age 70, whichever comes first. 6

7 If the applicant is more than 10 years from retirement, the loan can be assessed on current earned income and the term extended by up to 5 years past retirement age subject to proof of pension contributions (maximum age 75) and the Bank being satisfied that the mortgage remains affordable into retirement based on the credibility and sustainability of income in retirement e.g. rental, Trust income. If the applicant is within 10 years of retirement, or if the loan extends more than 5 years into retirement, the loan will be assessed on the lower of earned income and the income available during retirement (whichever is lower). Lending in retirement Lending Limits Rules Commitments Background buy to let Second mortgages Pension contributions School fees and childcare Ground rent/service charges Other debts 75% LTV or when we are lending beyond 85 years of age. Minimum income 30,000 When lending beyond 85 years of age, please refer For joint applications the affordability assessment will be based on the Survivors pension provision together with their other personal income in retirement. The portfolio will be stressed at 125% at pay rate to be classed as self-financing. Any shortfall will be deducted as a commitment and proof of rental income and mortgage payments will be required. Monthly commitments entered into the affordability calculator. Not deducted as a commitment. Taken as a commitment. Taken as a commitment. Any debts remaining on completion are to be deducted as a commitment including credit card balances at 3%. Credit commitments with less than 6 months to run can be discounted from the affordability assessment, subject to suitable evidence from the customer. Interest only by referral only Lending limits 60% to 1,000,000 Acceptable repayment vehicles There must be an acceptable method of repayment backed by evidence of repayment strategy required. All repayment vehicles must be in the United Kingdom only. Investment properties 80% of the equity (min 50k equity) Second homes 70% of the equity (min 50k equity) Stocks & Shares/Unit Trusts/Investment Bonds/OEICs 80% of the value (min 50k equity) Endowments 100% of projection (middle growth figure) Money purchase pensions 25% of current fund value (min 500k) Final salary pensions 25% of current fund value (min 250k) SIPPs Can be considered on a case by case basis (min 25% of fund value. Please refer where the customer has other substantial pension arrangements) min 500k. Cash 100% of current balance held 7

8 Sale of main residence May be considered but only alongside other repayment vehicles. (Investments must be quoted within the FTSE index and in steering). Second homes Rental calculation Term Percentage Not applicable. Based on residential affordability calculation plus any additional expense of running the second home property. 25 years maximum. 70% maximum. Property 2 Kitchens Accepted, unless valuers consider that it is inappropriate. Agricultural ties Not accepted Annexe/Granny flat Accepted if used by own family /relative dependant. (Not let out or non-family) Bed and breakfast Coastal erosion Construction all timber Construction concrete Construction Large Panel System (LPS) Construction Mundic Block Materials Construction Pre-Cast Reinforced Concrete (PRC) Certain types of PRC construction are designated defective and may not be acceptable unless repaired. Construction single skin Construction steel framed Construction thatched Construction timber framed Construction Wimpey no fines Defective designated properties Dwellings Ex Local Authority Farms, small holdings or properties with agricultural restrictions in place Flats- number of floors Flats over shops Flying freehold Freehold flats Habitable condition PRC properties not repaired under an approved PRC [Homes] Ltd scheme not accepted. Accepted, with durable outer leaf. Property acceptability is based on a satisfactory valuation report from the Banks appointed valuer. Non-standard construction will be assessed on individual merit. Single dwelling only accepted. Ex-Local authority Flats and Houses must be purchased more than 5 years (from application date), up to 75% LTV. Flats located in purpose built blocks where there are more than 7 floors will only be considered subject to the valuer confirming the property and/or locality is mortgageable and marketable. Where there are 4 floors or more there must be a lift. Above or adjacent to restaurants, food outlets, public houses, launderettes, hairdressers or other premises which might represent a fire risk or adversely affect saleability, or where the surveyor s comments are negative are generally not acceptable and will be subject to valuer s comments. Structurally sound; insurable; have a working kitchen with running water, storage and ability to heat food; have a working bathroom with working lavatory, sink and ability to shower or bath are accepted. The mortgage advance may be wholly or 8

9 Huf Haus Holiday/Second home Home for dependent relative Home Buy Houseboats/ Mobile homes Housing Defects Act 1984 Japanese knotweed Key worker scheme Leasehold requirements Listed building Location of lending Minimum property value/purchase price Warranty for New builds partially retained pending completion of works required bringing the property to a suitable condition for lending. Accepted. As long as underwritten on a residential basis, no rental income taken into account. Accepted (see second home criteria) Properties designated as defective under the Housing Defects Act 1984 or the Housing Act 1985 (or any laws amending or repealing them) are not accepted. Repaired properties may be considered as an exception. Accepted if at least 75 years remain at the start of the mortgage term and 50 years remaining at the end of the mortgage term. We will consider shorter leases by exception, and those with statutory processes in place for extensions. Accepted if in England and Wales (Properties in Scotland, Northern Ireland, Channel Islands, Isle of Man or overseas properties not accepted). 50,000. Properties built within 10 years must have an acceptable warranty in place i.e. NHBC New build incentive Builder incentive accepted up to 5% of the purchase price (deposit must be from applicants own resources). New builds loan to value Lower maximum LTV for leasehold flats (75%) and freehold houses (80%) that are new builds. Non-habitable condition Onerous restrictions Not accepted e.g. retirement flats where you can only sell to people over 55. Onerous ground rent/service The ground rent and other analogous property fees must be charge reasonable at all times during the lease term and must not exceed more than 0.1% of the property value at the start of the lease term. It is acceptable for ground rent escalation to be linked to RPI (retail Price Index) or a similar index or to escalate periodically in line with the increase in the RPI since the date of the last review. Unreasonable multipliers of ground rent will not be permitted and cases other than as described above must be referred to us. Property internal door locks and/ or separate utility services Property live/ work units Property owned in trust Property part owned Property shared services Recently purchased property Accepted if 6 months has elapsed since completion of purchase. Restrictive covenants Retentions Minimum 2,000 Retirement homes Right to buy Self-build Shared ownership Shared services Solar panels Standard condition Must be in a good state of repair as advised by the valuer in the valuation report. 9

10 Studio flats Subsidence Substantial renovation Valuation Studio flats above 35 square metres externally are acceptable. Refer to underwriter - Properties impacted with any movement as identified and not declined by valuer. Refer to underwriter - Properties requiring substantial renovation without planning permission e.g. total house renovation, fitting of new kitchens and bathrooms, extensions. Valuation report from the Bank's appointed valuer is required. Further Advance Further Advance A request for a Further Advance will only be considered after 6 months. Porting Product Porting Existing Product A request to port an existing product will only be considered after 6 months. Glossary BDM BTL CCJ CIS DIP DMP DRO DWP Huf Haus IVA LIR LLP LTV Mundic NHBC PRC Business Development Manager Buy to Let County Court Judgement Construction Industry Scheme Decision in Principle Debt Management Plan Debt Relief Order Department for Work and Pensions Prefabricated homes manufacturer Individual Voluntary Arrangement Lending into retirement Limited liability partnership Loan to Value Cause of deterioration in concrete due to the decomposition of mineral constituents within the aggregate National House Building Council Pre-cast Reinforced Concrete 10