Our Lending Policy Guidelines.

Transcription

1 March 2018 Our Lending Policy Guidelines. (Or in other words) the boring details you need to know about our mortgages, that save you from having to make small talk over the phone. Remarkably honest You won t find any amusing little notes here, juststraightforward, honest information Get honest answers on or visit us at securetrustbank.com/intermediaries THIS INFORMATION IS FOR INTERMEDIARIES ONLY

2 Secure Trust Bank Mortgages Our Lending Policy Guidelines This document provides guidance for mortgage intermediaries on the areas Secure Trust Bank will consider as part of its mortgage underwriting processes. In addition to the guidelines set out in this document, Secure Trust Bank also applies a number of proprietary credit assessment tools, the outcome of which may result in a case being declined despite appearing to fit within the guidelines set out in this document. There may also be cases that fall outside these guidelines that we will be willing to consider. Secure Trust Bank retains the right to change its underwriting policy at any time and without necessarily updating these guidelines. However, Secure Trust Bank will try to ensure the guidelines set out in this document represent the Bank s current approach to lending. In the event of any clarification being required please contact your Business Development Manager or the Intermediary Support Team on Maximum Loan To Value Maximum Loan To Value The Loan to Value of all residential mortgage applications must be calculated using the lower of the purchase price or valuation, unless there is a specific policy rule that provides alternate guidance (eg Undervalue Transactions). The maximum advance that will be considered for purchase and remortgage transactions is as follows: Loan Amount Maximum Loan to Value Up to 750,000 85% 750,001 to 2,000,000 80% New Build Houses 85% New Build Flats 75% The maximum Loan to Value may be restricted by other policy rules, eg product LTV limits or property type. Maximum Agreeable Monetary Loan Limits Purchase, Remortgage Minimum Monetary Loan Limits Purchase, Remortgage As specified within the Lending Product Guide. The minimum loan amount is 25,001. Mortgage Types Purchase Remortgage Bridging Finance Permitted where the refinance will occur more than six months after the original purchase date of the security (registered proprietorship). Subject to purpose qualification the following are acceptable (not exhaustive): Straight debt up-lift; Home improvements - proof may be required; Capital raising. The following capital raising purposes are excluded (not exhaustive): Payment of gambling debts; Payment of taxes; Borrowing for business; Time share purchase. THIS INFORMATION IS FOR INTERMEDIARIES ONLY Page 2 of 11

3 Debt Consolidation Back to Back Sale Debt consolidation is restricted to 30,000 of unsecured debt. Outstanding unsecured debt to be consolidated will be ignored, when assessing affordability, provided the applicants meet the following definitions: A customer who: 1. (a) within the last two years has owed overdue payments, in an amount equivalent to three months payments, on a mortgage or other loan (whether secured or unsecured), except where the amount overdue reached that level because of late payment caused by errors by a bank or other third party; or 2. (b) has been the subject of one or more county court judgments, with a total value greater than 500, within the last three years; or 3. (c) has been subject to an individual voluntary arrangement or bankruptcy order which was in force at any time within the last three years. If applicants do not meet the above definition then they must be able to demonstrate affordability on the assumption that the total amount of unsecured debt being consolidated is to remain outstanding i.e the loan payments must be included within the affordability assessment. Outstanding loans will be ignored if no more than 3 monthly payments are remaining at application. A Back to Back sale occurs when a property is bought and then sold on within six months ie the applicant is buying the property from an individual who has themselves bought the property less than six months before. We will not lend on Back to Back sales within six months of application. The current vendor must have owned the property for at least six months before the Bank will accept an application to purchase, unless the vendor is a: Personal representative of the registered proprietor; or Institutional mortgagee exercising its power of sale; or Receiver, trustee-in-bankruptcy or liquidator; or Reputable developer or builder selling a property acquired under a part exchange scheme. Please refer to an underwriter for consideration. Mortgage Terms Minimum Term Maximum Term Capital & Interest Repayment Method Interest Only / Part Interest Only 5 years. 35 years. The loan term cannot extend beyond the eldest borrowers 86th birthday An appropriate mortgage term can be established, subject to: Consideration of the applicant s declared retirement age or 75, whichever is lower; Where the agreed term will fall outside of retirement age and the loan is considered affordable based on post-retirement income; The loan will be repaid before the eldest applicant s 86th birthday; On leasehold properties a minimum of 85 years unexpired lease at the point of the application and valuer s comments. Acceptable repayment vehicles: Interest only lending is available to 65% LTV and Part & Part available up to 85% LTV (of which no more than 65% can be interest only), using the following repayment vehicles (and % of value accepted): Sale of property to be mortgaged, if it is a main residence (there will be a requirement to have 150k/ 200k (Regions / London, South East and Eastern Region) available equity ) Cash (80% of the current value of the cash instruments) Pension (80% of the amount available as a lump sum distribution) Endowment (75% of forecast amount after any redemption costs) UK based Stocks & Shares ISAs (75% of the current value of the investment portfolio) Unit Trusts, OEICs or Investment Bonds (75% of the current value of the investment portfolio) UK based stocks & shares (75% of the current value of the investment portfolio) Sale of second home/buy to Let (UK) (80% of the equity net of any existing loan) THIS INFORMATION IS FOR INTERMEDIARIES ONLY Page 3 of 11

4 Lending Schemes Right to Buy Tenants Incentive Scheme Shared Ownership Home Buy Option Ministry of Defence Homes Purchase from Own Company Help to Buy Scheme Key Workers Scheme Rent a Room Scheme Not currently permitted. Not permitted with regards to a new shared ownership purchase. However, a remortgage to purchase the final share of the property is permitted. Minimum Age Requirements Main Income Earner Other Applicants 18 years at the point of application. 18 years at the point of application. Maximum Age Requirements All Applicants Loan must be repaid prior to the eldest applicant s 86th birthday. Subject to affordability including assessment of expected post-retirement income if beyond applicant s declared retirement age, or 75 if lower. Applicant Type First Time Buyers Next Time Buyers EU Member Citizens Non-EU Member Citizens Guarantor Employment Type Employed Permanent Employed Probationary Employed Commission Only Employed Zero Hour Contract A first time buyer application is defined where any of the applicant(s) have never owned a property. Permitted where the applicant is evidenced as a British or EU Citizen with the right of abode, with three years residential history in the UK immediately prior to application. Not permitted where the applicant is an expatriate who is not currently residing in the UK. Not permitted where the applicant is either permanently or temporarily working in another country and is not residing in the UK full time. Permitted where the applicant is evidenced as a non-eu Citizen who holds indefinite right / leave to remain in the UK, with three years residential history in the UK immediately prior to application. Permitted, please refer to the Intermediary Support team or your BDM to discuss this prior to submission. Permitted, please refer to the Intermediary Support Team or your BDM to discuss this prior to submission. THIS INFORMATION IS FOR INTERMEDIARIES ONLY Page 4 of 11

5 Employed Seasonal Contract Contractors Employed Family Business Employed Maternity Leave or Imminent Maternity leave Employed Multiple Employment Self-employed Applicants should have at least 3 months remaining on contract. Applicants with less than 12 months history in contracting roles will be considered, subject to the following: The applicant has skills and experience that are considered portable and in demand; The applicant is employed within an industry where temporary or short term contracts are common, eg IT industry; The applicant is employed at a senior level where transferring industries due to specialised skills is common, eg Senior HR, Risk, Compliance, Personnel etc. We will consider an applicant who is on their first contract. Income will be calculated based on the daily rate confirmed in the contract, eg daily rate x 5 days x 46 weeks. Proof of income may be required from an independent source. Affordability should take into consideration future childcare costs. Second job income is normally restricted to a maximum of 50% although depending on hours worked or type of occupation this may be extended. Please refer to the Intermediary Support Team to discuss this prior to submission. Self-employment is defined as a Sole Trader, Partner or Ltd Liability Partnership or where more than 25% shareholding is held in a Limited Company. Income to be taken into account is limited to the final audited accounts. Income Multiples Sole / Joint Borrower(s) Maximum allowable: 4.49 x income, although we may make an exception for very strong cases. Please refer to an underwriter. Affordability Affordability Assessment An affordability assessment based on a Capital & Interest repayment method is required in all instances to support the authorisation of an Offer of Loan. An affordability assessment is considered on the basis of net applicant income and household expenditure. A household is considered to be anyone who will be resident in the security property as their main residence and has a financial dependency on the applicant(s). A dependent child is defined as a child who is residing in the security as their main home and 16 years of age or under. A dependent adult is defined as anyone who is 17 or older and is residing in the security as their main home and is unable to independently support themselves financially. Income Type Allowable Income Employed Basic Income Overtime, Bonus and Commission Only income which is allowable under policy and evidenced should be used to assess affordability. Income from non-applicants cannot be used to assess affordability. 100% of gross basic salary should be entered. 50% to a maximum 100%. Amounts in excess of 50% should be referred to an Underwriter prior to case submission. THIS INFORMATION IS FOR INTERMEDIARIES ONLY Page 5 of 11

6 Shift Allowance Car Allowance Large Town Allowance Travel or Petrol Expenses Disability Living Allowance Working Tax Credit Child Tax Credit Family Allowance Attendance Allowance Carer s Allowance Foster Carer s Allowance Incapacity Benefit Income Support Maintenance Pension in Payment Property Rental Income Lodger Rental Income Investment Income Self-employed Income 100%. 100% where evidenced and contractual. 100% where evidenced and contractual. Must have been continuous for at least two years prior to application. We will consider up to 100% of payments, where supported and evidenced by a Court Order, Child Support Agency, Child Maintenance Service or a legally binding family arbitration agreement. 100% of state, widows, war, company & private pensions. If no mortgage exists on the property we will consider up to 100% of the rental income. In the case of a mortgaged property, we will only consider the surplus rental income over and above 135% of the existing mortgage payment. Please note, all rental income will be assessed as self-employed income. The Bank does not permit any proportion of the security property to be let to a third party. Permitted 50%. Please refer to an Underwriter for consideration. 100% where evidenced as primary income. Income normally averaged over the last two full years. We may consider last year s income only, if trading less than two years or if income has fluctuated. Please refer to an Underwiter for consideration. We assess affordability based upon the following: Sole Trader - net profit before tax Partnership/Ltd Partnership/Ltd Liability Partnership - partner s salary plus share of net profit before tax Limited Company - director s remuneration plus dividends received (dividends cannot exceed net profit before tax). Contract Worker Income will be calculated based on the daily rate confirmed in the contract, eg daily rate x 5 days x 46 weeks. THIS INFORMATION IS FOR INTERMEDIARIES ONLY Page 6 of 11

7 Expenditure Type Based on monthly expenditure, used in affordability assessment. Dependent Maintenance Council Tax Insurance Payments and Contributions Travel and Transport Housing, Fuel, Power and Communication Other Expenditure Credit Cards, Store Cards Loan / Hire Purchase Agreements Outstanding, Residential Owner Occupier Mortgage Outstanding Buy to Let Mortgage A deduction covering: All child maintenance however paid; Nursery, school, college and university fees. Actual or expected council tax. A deduction covering: Buildings and contents insurance premiums; and Those termed as essential by the borrower, eg life insurance and protection or pension contributions. A deduction covering: Essential and non-essential travel; Car tax, car insurance and car maintenance; Public transport costs. A deduction covering: Water, gas, electricity and other heating; Telephone landline and mobile; TV licence; Ground rent and service charges. A deduction covering: TV and internet packages. Declare all balances on credit cards and store cards which are not repaid in full each month. 3% of the outstanding balance will be used in the affordability calculations. Declare all monthly payment(s) which will not be repaid prior to release of funds or within three months of the application. Declare any other mortgage debt which will not be repaid prior to release of funds. Declare any Buy to Let or Let to Buy mortgage debt which will not be repaid prior to release of funds and the monthly rental income received (based on 12 monthly payments p.a) if less than 135% of the monthly mortgage payment on the debt. Impaired Credit Credit Searches Impaired Credit History (ICH) Repossession A credit search is performed on all applicants. All applicants will be credit scored. However, we rely on experienced and fully trained underwriters to assess all mortgage applications in order to make a lending decision. Note: Applicants achieving a very low score will not normally be considered and are unlikely to be accepted. Please supply the full credit history of all applicants. Refer to individual products for levels of ICH acceptable. Considered where the repossession occurred over six years ago. Deposit Type Equity Savings Evidence of deposit is required in all purchase cases. THIS INFORMATION IS FOR INTERMEDIARIES ONLY Page 7 of 11

8 Gifted Transfer at Undervalue Gifted deposits are acceptable provided the donor is a close family member and they retain no interest in either the sum provided or the property purchased. Close family members are defined as someone who is related to the applicant by: Blood or birth; Marriage or civil partnership; Co-habitees occupying the property as a spouse or partner. A Deed of Gift is required, or a letter from the donor if less than 15,000. Where a deposit greater than 15,000 is being gifted a special condition will be added to the mortgage offer instructing the solicitor to obtain a Deed of Gift from the donor. Other gifts are not accepted. This is permitted where genuine. Loan to Value is calculated using an open market value. Please refer to Intermediary Support for help. Builders Incentive Permitted up to a maximum 5%. Vendors Incentive Identification Evidence We will try to verify the identity of the applicants electronically. If this is unsuccessful we will ask you to obtain the following evidence. Identification and Residential History Bank Statement Mortgage Statement Rent Reference Other Income Confirmation Employment Confirmation Acceptable proofs of name (list A) Acceptable proofs of address (list B) Valid and current government issued passport that has the Machine Readable Zone (MRZ)*. Valid and current photo or paper driving licence*. Valid and current national identity card that has the Machine Readable Zone (MRZ)*. Valid and current Fire arms licence*. HM Revenue & Customs (HMRC) correspondence detailing name, address and National Insurance number (less than 12 months old). Benefit or pension entitlement letter detailing name, address and National Insurance number (less than 6 months old). One item is required from list A and two from list B. Valid and current photo or paper driving licence (if not used to verify name in list A). A bank, building society or credit card statement displaying the customer s name and address (dated within the last 3 months - online statements or store card statements are not acceptable). UK annual mortgage statement displaying the customer s name and address (less than 12 months old - online statements not acceptable). HM Revenue & Customs (HMRC) correspondence displaying the customer s name, address and National Insurance number (less than 12 months old and if not used to verify name in list A). Benefit or pension entitlement letter detailing name, address and National Insurance number (less than 6 months old and if not used to verify name in list A). Utility bill detailing the customer s name and address (less than 3 months old - online statements are not acceptable). Council Tax bill detailing the customer s name and address (valid for current year). Local Authority / Housing Association tenancy agreement (private tenancy agreements are not acceptable). Where an item marked * has been provided from list A, one item of proof from list B will be accepted. Documents can be accepted in the following format; Original documents accepted (those marked * should not be encouraged to be posted) Correctly certified photocopies by an acting broker / introducer are preferred. However, these can be accepted from a solicitor, suitably qualified accountant (please see our how to get an application right first time guide for details) or the Post Office as part of the Post Office Certification scheme. Latest three months salary fed bank statements are required for all applicants. Evidence of last 12 months payment conduct may be requested. Not normally required. Secure Trust Bank reserve the right to request a reference if required. Evidence of all supporting approved income is required. Evidence of earned income is required: Latest 3 full months pay slips. P60 s may be required to evidence high levels of overtime, bonus or commission. In the case of zero hour contracts we require a minimum of six months payslips. THIS INFORMATION IS FOR INTERMEDIARIES ONLY Page 8 of 11

9 Self-Employment Confirmation Solicitor Panel Management Contractor Confirmation Latest two years accounts* (if less refer to an Underwriter for consideration); and Accountants certificate*, plus: Latest six months business bank statements; and Latest three months personal bank statements. * SA302s plus Tax Year Overviews are accepted if the applicant does not retain the services of an accountant or if the accountant s qualifications are not acceptable. Joint Representation A panel solicitor will represent the Bank and the applicant within the legal transaction. Costs to be borne by the applicant unless specified otherwise. The solicitor panel will be managed by Secure Trust Bank. Separate Representation The applicant can appoint their own legal adviser who will act for the applicant only. A panel solicitor will represent the Bank within the legal transaction. Costs to be borne by the applicants. To verify the income, a copy of the applicant(s) current contract is required; and A copy of applicant CV Latest six months business bank statements Latest three months personal bank statements Residential Security Policy All Mortgage Applications Form of Valuation All mortgage applications are subject to a property that is suitable for mortgage purposes being offered as security. The suitability of the property is determined by the valuation, the Bank s guidance notes for Panel Valuers and additional policy rules. First Mortgage Valuation Valuation Options An applicant may choose one of the following forms of valuation: Standard Valuation Report; Home Buyers Valuation Report; Full Structural Valuation Report. We accept a minimum property valuation of 65,000. We will require a surveyor to complete a standard valuation of the property, which is solely for our benefit in assessing that the property has sufficient security for the amount of loan applied for. The applicant(s) will receive a copy of this at the time of the offer, however it is strongly recommended that the applicant(s) arrange a more detailed report for their own protection. If the applicant(s) require a more detailed report this can be arranged via our online portal when submitting a full mortgage application. If not, then a standard valuation will be carried out. The surveyors report and valuation for us is prepared by an independent valuer on whose behalf we do not accept liability. Security Value and Condition House, Bungalow Minimum Purchase Price / Value 65,000. Flat or Maisonette Minimum Purchase Price / Value 65,000. Specialist Reports Requirement Where the valuer requests a specialist report, all reports should be provided by an approved contractor and evidenced accordingly. Security Demand Property Demand Permitted subject to the Valuer confirming the property is suitable security for our Mortgage including: Where there is good demand and the property is likely to rise and fall in line with the general market conditions; The location, environmental factors or individual features of the property may cause the value to perform better than market conditions. Security Geographical Location England Isle of Man and Channel Islands are not permitted. THIS INFORMATION IS FOR INTERMEDIARIES ONLY Page 9 of 11

10 Wales Scotland Northern Ireland Ireland Security Tenure Freehold Flying Freehold Leasehold Commonhold Permitted where security is not a flat or maisonette. Properties comprising a flying freehold of up to 25% of the property are acceptable, subject to the following: The marketability and value of the property is not adversely affected; Legal arrangements for rights of support, protection and entry for repair exist. Permitted where there is a minimum of 85 years unexpired lease at the point of application. Security Basic Criteria Minimum Accommodation Requirement Minimum Utilities Requirement Permitted where internal WC, bathroom and kitchen exists. Permitted where mains service connections exist. May consider where septic tank or private utilities exist. Proximity to Japanese Knotweed Security Acceptable Purposes Ground Rent Acceptable, subject to any lease with provision for a periodic increase in the ground rent is capped to a fixed amount or percentage, which can be readily established and is reasonable. Minimum New Build Requirement Minimum Self Build Requirement House, Bungalow Maximum LTV: 85% houses / 75% flats A newly built property is defined as one of the following: A property built, renovated or converted within the last 12 months; A property being purchased or occupied for the first time in its current form; A property being sold by the builder or developer. Newly built properties are considered, subject to the property being covered by one of the following approved Building Standards Indemnity Schemes: NHBC; Premier Guarantee; Zurich; BLP formerly known as Building Life Plans (excluding self-builds under construction); Build Zone; LABC New Home Warranty; Build Assure (New Homes Structural Defects Insurance); Checkmate / Castle 10. New build: Maximum 85% LTV. Non-new build: Maximum 85% LTV. THIS INFORMATION IS FOR INTERMEDIARIES ONLY Page 10 of 11

11 Flat / Maisonette Back to Back Build Formation Coach House Flat Holiday and Second Homes Flats Above Commercial Premises New build: Maximum 75% LTV. Non-new build: Maximum 85% LTV. Subject to a maximum of eight storeys. However, this is reduced to three storeys where there is no lift access. We may consider flats higher than eight storeys, please refer to an Underwriter. Studio flats are not permitted. Modern Coach House style accepted. Holiday homes not permitted. Second homes may be considered, please refer to Intermediary Support. Properties above or adjacent to commercial premises are unlikely to be acceptable. Please refer to an underwriter. Security Unacceptable Purposes Security Type Not permitted: Studio flats; Commercial premises; Shared ownership; Flats over three storeys with no lift access; Pre-cast reinforced concrete construction (unless improved to building regulation standards and confirmed by a structural engineer); Bedsits; Static caravans; Mobile homes; River boats; Farms; Purchase of Land; Properties constructed entirely from timber ie log cabins; Freehold flats / apartments unless there is an agreement in place for the maintenance of the whole block; Properties excluded from full buildings insurance; Properties affected by local planning issues; Properties subject to third party interest; Properties where Japanese Knotweed is present and the Valuer has indicated that the property is unsuitable for mortgage purposes. Timber Frame Steel Stud Frame Concrete Frame Prefabricated Concrete System Refer to an Underwriter. Properties constructed entirely from timber are not accepted. Not permitted (unless improved to building regulation standards and confirmed by a structural engineer). Airey, Boot Beaucrete, Cornish Unit, Dorran, Dyke, Gregory, Myton, Newland, Orlit, Parkinson Frame, Schindler and Hawkesley SHS, Stendt, Stonecrate, Tarran, Underdown, Unity and Butterley, Waller, Wates, Wessex, Winget, Wollaway, Hamish Cross and Stour Smith Boswell. Get honest answers on or visit us at securetrustbank.com/intermediaries THIS INFORMATION IS FOR INTERMEDIARIES ONLY STBMO002_0318