Second charge mortgages NOVEMBER Lending Criteria. For intermediary use only.

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1 Second charge mortgages NOVEMBER 2018 Lending Criteria For intermediary use only.

2 Contents Please use this guide when sending second charge mortgage applications to us. It provides details about the applications we will accept and the things we need to help support an application. Table of contents 1. About our loans 3 2. Eligibility General The property to be mortgaged must Age Income requirements Employed income Self-employed income Retired applicants Borrowing into retirement 5 3. Credit history 6 4. Property 7 PAGE 2 OF 7

3 1. About our loans Second charge mortgages from Paragon are available from 20,000 to 500,000, for a term of 5 to 30 years. Please see our Product Guide for full details. We offer loans for most purposes apart from: settlement of outstanding tax funding cosmetic surgery financial speculation to install solar panels marital settlement PAGE 3 OF 7

4 2. Eligibility To qualify for one of our loans the applicant(s) must: live at the security address have lived in the UK on a permanent basis for the past 2 years, and have been liable for UK tax during this time provide proof of residency and identity for the past 24 months, this is normally done through an electronic credit search make the monthly repayments by direct debit from an account in at least one of the applicants name not be owner(s) of, or employed by, the advising firm 2.1 General Loans available to a maximum of two borrowers per application We are not able to lend where a power of attorney is in place Upon completion of the loan, any secured debt will be paid directly to the creditor by electronic transfer All other funds used for consolidation purposes will be sent to the customer by cheque, made payable to the individual lenders Joint borrowers who are married, in a civil partnership or joint owners of the property must become joint borrowers 2.2 The property to be mortgaged must: have been owned for at least 6 months have a minimum value of 75,000 have a first charge residential mortgage in place be residential, owner occupied and situated in England, Wales or Mainland Scotland 2.3 Age The minimum applicant age is 21 The minimum applicant age for income to be taken into account is 23 At least one earning applicant must be at least 25 years of age Applicants must be under 75 at the date of the second charge advance Applicants aged over 70 at the start of the loan will be required to obtain independent legal advice Any applicant whose income is being taken into account must be under 80 at the end of the term Non-earning applicants and applicants whose income is not being taken into account must be under 85 at the end of the term 2.4 Income requirements All income must be evidenced, regular and sustainable At least one applicant must receive a minimum gross annual income of 15,000 We accept child benefit at 100%, for up to 2 children, up to age 13. We will not count any other state benefit towards the affordability assessment We will carry out an affordability assessment for each application We will stress test the first and second charge mortgage payments as part of the affordability assessment Disposable income is calculated as net monthly income minus monthly outgoings We class monthly outgoings as the first mortgage payment, our payment, monthly expenditure plus any monthly credit commitments remaining after our loan completion PAGE 4 OF 7

5 2.4.1 Employed income Applicants who are employed must: not be paid in cash be in permanent or long term contracts with minimum 12 months remaining provide evidence of three months income by way of payslips support manual payslips with a non-manual P60 or bank statements The income we will use in the affordability assessment is: up to 100% of proven, regular overtime the applicant s net pay, calculated using the lower of the last three months average salary, or year to date monthly average bonus payments, if these are at least quarterly. Annual bonus payments may be accepted by referral Self-employed income We will assess applicants as self-employed if: they are sole traders or sub-contractors they hold at least 20% of the issued share capital of the company they are employed by they are related to the owner of the company they are employed by the applicant has key responsibilities within a company employing less than five people To support a self-employed application, we will: require the applicant to have been self-employed for at least two years in the same profession require the past two years tax calculations with corresponding tax year overviews require the past three months business bank statements to evidence current trading activity use net income (total income received minus income tax charged and NI contribution) use the lower of the last two years net income, or average if an improving trend is evidenced 2.5 Retired applicants We accept retired applicants subject to: confirmation of pension income and an affordability assessment under the same terms as an employed applicant evidence of last three months pension payments. We will calculate assessable income in the same way as for employed applicants 2.6 Borrowing into retirement We will lend into retirement subject to the following conditions: applicants who are in receipt of a private pension income at the time of the application are subject to standard income confirmation requirements and affordability assessment for any applicant, the age taken for retirement will be the customer s declared retirement age which must be less than 70 years old applicants who wish to borrow into their retirement, but reach retirement age within 10 years from the date our loan is made, will not be able to have their income taken into account in the affordability assessment (i.e. applicants will be expected to reduce the term of their loan so that it is repaid before their declared retirement age) where the loan term extends into retirement for either applicant, all applicants will need to complete the relevant declarations on pages 4 and 7 of our application form you will need to provide evidence that the customer is contributing to a pension (e.g. pension deductions noted on a current payslip, or payment to a pension provider evidenced by bank statements). PAGE 5 OF 7

6 3. Credit history All applications are subject to a credit score. We do not accept the following items: any mortgage currently in arrears any CCJs in the last 12 months, for any applicant any bankruptcies or IVAs active at any time in the last 6 years, for any applicant applications from disqualified directors, current or historic All other adverse credit is taken into consideration by the credit score. In exceptional circumstances, we may decline an application where the payment profile is considered extremely poor even if the normal lending criteria are satisfied. Customers who have taken a payday loan at any time are unlikely to meet our lending criteria. PAGE 6 OF 7

7 4. Property We will accept the following as suitable security: tenure should be Freehold (apart from flats or maisonettes), Leasehold or Heritable properties with a minimum of 85 years remaining on the lease at the start of the loan term and 65 years at the end ex-local authority houses permitted, subject to max 75% LTV and max 25k loan We will not accept the following property types: self-build properties shared ownership properties NHBC Certificate LABC New Home Warranty Premier Guarantee Architects Certificate Zurich Building Guarantee properties with flat roofs electrical substation within 10 metres mine shafts within 20 metres* studio flats under 30 square metres poor quality flat conversions flats without a full written valuation properties over or adjacent to commercial premises, or with an element of commercial use flats over 4 storeys high (10 within M25 area) or more than 100 units purpose built flats located in London or the South East valued at 2m or more where LTV exceeds 75% ex-local authority or housing association flats properties of non-traditional construction such as timber or concrete, except Wimpey no-fines and Laing Easi-Form properties where existing or possible structure defects are apparent properties subject to agricultural or other planning restrictions properties with an area of flying freehold exceeding 10% of the property properties that have been neglected or are in poor order properties built within the last 10 years without one of the following acceptable guarantees: properties designated as defective under any Housing Act properties which are subject to adverse factors that will materially affect the marketability including: high voltage pylons or mobile phone masts within 100m boarded up houses within the immediate vicinity properties in areas subject to antisocial behaviour properties subject to contaminated land or enforcement orders properties with solar panels installed where there is a lease in place for the roof space properties subject to notice of mineral extraction, contaminated land or previous mining subsidence and landfill* *If identified on a mining report. A mining report will only be requested if a surveyor makes specific reference to a defect that may be associated with mining, the cost of which will need to be met by the customer and paid up front Contact details scdirect@paragonbank.co.uk Telephone: PAGE 7 OF 7 PARAGON 51 HOMER ROAD, SOLIHULL, WEST MIDLANDS B91 3QJ ACORN17316 (11/2018) scdirect@paragonbank.co.uk