Sainsbury s Bank Buy to Let Lending Guide

Transcription

1 Sainsbury s Bank Buy to Let Lending Guide For mortgage intermediary use only Version 0.3

2 Eligibility criteria at a glance Here s a quick view of our Buy to Let lending criteria so you can make any necessary checks before submitting an application. You can find full details of our criteria later on in this document. Buy to Let & Consumer Buy to Let We offer both Buy to Let and Consumer Buy to Let mortgages. Applicant We accept a maximum of 2 applicants. All applicants must be at least 21 years old at time of application. The mortgage term can t go past any applicant s 76th birthday. All applicants must have been resident in the UK for three continuous years (but we will consider applications from members of the British Armed Forces who don t meet this criteria). At least one applicant must currently own a property in the UK prior to applying for a Buy to Let mortgage. We will accept Capital Repayment, Interest Only and Part & Part applications. We don t accept guarantor applications. We don t accept applications from Portfolio Landlords who own/will own 4 or more mortgaged properties in their personal name. We only accept applications from individuals and not Public Limited Companies. Applicants must have a good credit history - please see our Adverse Credit History Section. Lending Minimum loan amount is 40,000 and maximum loan amount is 1,000,000. Minimum term is 5 years and maximum term is 40 years. Maximum Buy to Let borrowing exposure is 2,000,000 over 3 Buy to Let mortgaged properties (total exposure including residential lending is 4,000,000). Remortgage at least one applicant must have owned the property for 6 months prior to application (but we will consider applications sooner in the case of inherited properties). A minimum income of 20,000 gross (one applicant) excluding rental income is required. We do not permit second charges to remain or exist at the time of drawdown. Must meet the following LTV requirements: Purpose Amount of lending Max LTV Purchase and remortgage 40, ,000 75% New build flats and houses Borrowing for debt consolidation 500,001-1,000,000 60% Accepted up to 65% LTV Not permitted Property Property location the rental property must be in Scotland, England, Wales or Northern Ireland. We do not lend against properties in the Channel Islands and Isle of Man. 60,000 minimum property valuation. Tenure: Freehold; Leasehold (minimum term of 85 years must remain at the point of drawdown); Commonhold; Absolute Ownership (Scotland); Flying-freehold up to 25%. We don t accept applications for: Right to Buy properties where the applicant is purchasing or remortgaging a local authority/housing association property and the property is subject to penalty clauses if sold within the pre-emption period; Shared ownership schemes where the borrower(s) will not have exclusive ownership of the property; Freehold flats Properties in Northern Ireland that are subject to Fee Farm Grant are not acceptable. Student Lets or Houses in Multiple Occupation (HMO s) Sainsbury s Bank Buy to Let Lending Guide 2

3 Our lending criteria Acceptable tenancy agreements The property may be let on the following tenancy types: England & Wales: Single Assured Shorthold Tenancy up to a maximum of 12 months; Scotland: An existing Short Assured tenancy up to a maximum of 12 months or a Private Residential Tenancy; Northern Ireland: Private Tenancy. A maximum of 4 individuals are permitted on a tenancy agreement. All individuals must be jointly and severally liable for the rent. Multiple tenancies (where each tenant signs a separate agreement) are not permitted. See High Value Tenancy for further information. Accountant qualifications Accountants signing and verifying an applicant s financial statements or accountant s certificates must be a member of a suitable professional body i.e.: Institute of Chartered Accountants, CA, ACA or FCA Institute of Chartered Accountants in Scotland, ICAS, ACAS, FCAS Institute of Chartered Accountants in Ireland, ICAI Chartered Association of Certified Accountants, ACCA or FCCA Chartered Institute of Taxation, ATII or FTII Association of Authorised Public Accounts, AAPA, or FAPA Chartered Institute of Management Accountants, CIMA, ACMA or FCMA Association of Accounting Technicians, MAAT or FMAAT Association of International Accountants, AAIA or FAIA Adding fees We charge product fees on some of our mortgages. If we ve added the fee to the loan, then we ll charge interest at the product interest rate over the term of the mortgage. For Buy to Let mortgages, the product fee cannot be added to the mortgage where it will take the borrowing above our overall maximum loan to value of 75%. In all other loan to value cases, the product fee can be added. We will not allow broker fees to be added to the loan. Adverse credit history We use credit reference agencies to look at an applicant s credit history. We won t consider applications from an applicant who has been subject to the following: Had a property previously repossessed by a mortgage lender; Bankruptcy Order or an Individual Voluntary Arrangement in the last 6 years; County Court Judgments or Defaults in the last 6 years with a total value of greater than 500; For applications where LTV is less than 75%, we ll consider an applicant who has missed 2 payments in the last 12 months; Had 3 payments in arrears showing at the credit bureau (irrespective of LTV) within the last 36 months. Meets the FCA definition of impaired credit history. A soft footprint credit search will be completed at Decision in Principle (DIP) stage. This will be upgraded to a hard footprint at Full Mortgage Application (FMA). Sainsbury s Bank Buy to Let Lending Guide 3

4 Affordability We ll only lend when we re confident that the applicant will be able to repay the mortgage. The following conditions must be met for both Buy to Let and Consumer Buy to Let applications: Evidence that at least one applicant earns a minimum personal gross income of 20,000 is required (excluding income received from BTL properties). The rental income must provide additional coverage of the monthly mortgage payment calculated at a stressed level of interest rate. If the mortgage is on a Capital and Interest repayment, the monthly mortgage payment will be calculated using the interest and capital amount that is repaid each month. The coverage ratio and stress rate applied will depend on the product length and tax status of the applicant as shown in the table below: Coverage Ratio Stress Rate Remortgage (without Capital Raising, i.e. Transitional Arrangements** One or more applicant is a higher or additional* rate tax payer All other tax bands Lower than 5 year fixed or capped product 5 year or more fixed or capped product 125% Higher of product rate or 5% All other applications types 145% 125% Higher of product rate plus 2% or 5.5% Higher of product rate or 5% * Top rate for customers in Scotland. **We will only consider remortgage applications under transitional arrangements that meet the following criteria: Buy to Let property must have been purchased before 1 January 2017; No additional Buy to Let lending has been taken on the property on or after 1 January 2017; and Buy to Let remortgage application with no additional borrowing as a part of this application. In addition to the requirements above, Consumer Buy to Let applications will also be subject to a personal affordability check. Consumer Buy to Let applicants must be able to demonstrate an on-going ability to fund their current lifestyle from sources other than the rental income associated with the property. Applicants We ll accept a maximum of 2 applicants. All applicants party to the loan must not be over indebted and pass our Credit History assessment as per our residential criteria. Applications are only accepted from individuals and will not be accepted from the following: Applicants with diplomatic immunity Companies Properties sourced via property investment clubs. Armed forces personnel Please see BFPO Arrears Please see Adverse Credit History Sainsbury s Bank Buy to Let Lending Guide 4

5 Background buy to let We will not accept applications from applicants who own 4 or more mortgaged Buy to Let properties solely or jointly in their personal name. This includes the property attached to this application. This also includes joint applications where one applicant would not on their own count as a portfolio landlord, but the joint property exposure of the two applicants would take them to this limit. We do not take into consideration any properties held in a company name. For applicants with background Buy to Let properties, please gather details of the portfolio and ensure it satisfies the following conditions: No more than 2m in total Buy to Let borrowing including this application No background Buy to Let properties for Consumer Buy to Let applications Total portfolio must be self-sufficient at an Interest Coverage Ratio of 125% at 5%. If the applicant s existing portfolio does not meet the stressed payments rate then Sainsbury s Bank will regard the applicant as already overstretched and this will fall outside our policy. Calculation: Annual rental income must be greater than (total background BTL borrowing x 5%) x 125%. Back to back Back to back is typically where the seller has owned the property for less than 6 months. For purchase applications we ll decline the application if the seller has owned the property for 6 months or less. Similarly for remortgages we won t lend if the applicant has owned the property for 6 months or less. The only exception to this is where the property has been inherited and it can be shown that the property has gone through probate. Bank statements For further information on our supporting document requirements, please see Evidence of income for further information. Bankruptcy Please see Adverse Credit for further information. BFPO/Armed Forces (Military, Naval and Air Forces) We ll consider all applications from members of the British Armed Forces, including those with a British Forces Post Office (BFPO) address. Service personnel who have raised the deposit for their property through the Forces Help to Buy Scheme (through the Loan [not Equity Loan] Scheme) are acceptable, as long as the monthly repayment, including the mandatory insurance payment, is included in the affordability calculation; this will be confirmed from the Personal Information Note (PIN) that the MoD issues to the applicant. These costs should be keyed under Other Commitments. Blocks of flats All flats in blocks and Scottish tenements not exceeding ten storeys (ground floor with nine floors above) in height, will be acceptable at the discretion of the Bank s Valuer and subject to the following: a lift must be present if the block is over 5 storeys in height. all flats in blocks with >5 storeys 10 storeys must each achieve a minimum valuation of 250K. Builder cash deposit Please see New Build for further information. Sainsbury s Bank Buy to Let Lending Guide 5

6 Buy to Let mortgage We offer both Buy to Let and Consumer Buy to Let mortgages. We consider a Buy to Let to be a property that is occupied under a rental agreement and where there is no intention for the borrower or family member to reside. These loans are not regulated by the Financial Conduct Authority (FCA) under the Mortgage Conduct of Business (MCOB). The following examples explain what we consider to be a Buy to Let mortgage: If a customer is purchasing a property with the sole intention of letting it out under a rental agreement, we would treat this as a Buy to Let mortgage; If a customer is remortgaging the property and meets either of the criteria below, we would treat this as a Buy to Let mortgage: They already own other BTL properties; They do not own any other BTL properties and since becoming the owner of the property (which includes inheritance for example) the customer or their family members have not lived in the property. Capital raising We will consider remortgage cases with capital raising for personal use up to 75% loan to value. The following reasons for Capital Raising are not acceptable in Buy to Let or Consumer Buy to Let cases: Debt Consolidation Injection of capital into a business Start-up of a new business Currency speculation The purchase of stocks and shares Tax bill We reserve the right to request evidence of how funds will be used if we have any concerns. Committed Expenditure Our preferred credit reference agency will confirm any financial commitments the applicant has. Please also tell us about any commitments which haven t yet started but which will start after the mortgage is drawn down. Financial commitments should be keyed with the following details: Name of lender; Balance outstanding; Monthly payment (if appropriate) ; Expiry Date (if appropriate)*; Source of funds for debt repayment (if to be repaid box is ticked)**. A maximum of 4 rows per category of commitment can be keyed. For applicants with more than 4 in each category please contact us for advice on how to key. When we assess affordability we ll take the higher of the commitments the customer declared or those identified at the credit bureau. * We ll exclude commitments with less than 90 days to expiry from the affordability calculation. ** We may need to see proof that the customer will have the funds if they intend to repay the debts from savings, a gift from a relative or the sale of assets. If the customer intends to repay the debts from borrowing other than the mortgage requested, the monthly cost of the borrowing should be included under Financial Commitments. The applicant s overdraft balances should be keyed as they are at the end of the month and we ll check them against their bank statements. Sainsbury s Bank Buy to Let Lending Guide 6

7 Companies We won t accept applications for Buy to Let or Consumer Buy to Let lending from companies. Applications must only be submitted by an individual(s). Construction Types Please see Property Types for further information. Consumer Buy to Let We offer both Buy to Let and Consumer Buy to Let mortgages. We define Consumer Buy to Let as a Buy to Let contract not entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower. This means: The applicant is remortgaging a property they did not buy with the intention to let out; and The applicant does not own any other Buy to Let properties. In addition to monthly rental income requirements of the Buy to Let process, Consumer Buy to Let applications will also be subject to a personal affordability check. Consumer Buy to Let applicants must be able to demonstrate an on-going ability to fund their current lifestyle from sources other than the rental income associated with the property. Conveyancing Assistance with legal fees This will depend on the product. See the product section at: sainsburysbank.co.uk/intermediaries/products for further details. Fixed panel We have a wide panel of solicitors for borrowers to use. We are unable to accept anyone who is not on our panel. Separate representation Separate representation is not currently available through Sainsbury s Bank. County Court Judgment s (CCJ s) Please see Adverse Credit History. Credit score All applications are credit scored. We will decline applications which don t meet our credit score threshold. Cross tenure property We don t accept applications for cross tenure properties. Current property ownership To qualify for a Buy to Let mortgage, at least one applicant must currently own a property in the UK prior to applying for a Buy to Let mortgage. This will be validated by the credit report if the property is mortgaged. If the customer s property is unencumbered, our Underwriters reserve the right to ask for evidence of this. Sainsbury s Bank Buy to Let Lending Guide 7

8 Debt consolidation We do not allow Buy to Let applications for debt consolidation purposes. Deposit The minimum deposit depends on the product. In all cases, please select from the drop down box the source of deposit. Where there are multiple sources of deposit, please select the primary deposit source from the drop down box and capture all others in the notes section of the application. Please see Gifted Deposit and New Build Incentives for more information on these. Diplomatic Immunity We won t accept applications where either of the applicants has diplomatic immunity. Direct Debits It s a condition of the mortgage that the applicant sets up a direct debit on a current account held with a UK based bank to make their contractual monthly payments. The bank account that the direct debit is set up on must be in the name of at least one applicant. Borrowers can select a date between the 1st and the 31st for payments to be taken if there is a preferred date. Discounted Purchase We will not accept Buy to Let applications where the property is being bought at a price that s less than the property s value. Early repayment charges Customers may have to pay an early repayment charge if they repay the whole or part of their mortgage early (including if they move to a different product or lender) during a certain period. Although early repayment charges apply to our products, we give customers an annual overpayment allowance equivalent to 10% of the remaining mortgage balance. This means customers can choose to increase their monthly mortgage payments or make lump sum payments up to this allowance each year that early repayment charges apply, without incurring any charges. The overpayment allowance starts again each year from the anniversary of the drawdown, or the start of the new rate following a switch, and will be based on the current balance at the time. If a customer goes over their annual overpayment allowance for a given year, we ll make any early repayment charge on the amount they ve repaid over the allowance. Sainsbury s Bank Buy to Let Lending Guide 8

9 Evidence of income Where not called out in the table below, evidence for a Buy to let application will be gathered in line with Residential applications. Identity and address verification will always be gathered as per our residential requirements. Source of income Buy to let Requirement Consumer Buy to let Regular income assessed under PAYE Basic salary Large town allowance (not moving location) Car allowance Shift allowance (guaranteed) Second job salary (and allowances as above) Retirement income, e.g. private / state pension, annuities (currently received) Fixed term contracts Self-employed income All other income sources Lower rate / Non rate tax payer status with declared income above rental income* Lower rate / Non rate tax payer status with no declared income above rental income* Background buy to let income or rental income Latest monthly pay or pension slip (latest four week s pay or pension slip if paid weekly); AND Latest full month s bank statement evidencing receipt of above. As per Residential requirements except there is no requirement for business bank statements; AND Latest full month s bank statement evidencing receipt of above. As per Residential requirements; EXCEPT Instead of three months personal bank statements, latest full month s bank statement evidencing receipt of above. Latest P60 and latest monthly pay or pension slip (latest four weeks pay or pension slips if paid weekly); OR SA302; OR Latest three monthly or four weekly pay or pension slips; AND in all cases Latest full month s bank statements evidencing receipt of above. Last three months bank statements from all current accounts as per credit report evidencing no income received For each property and on an individual basis; A. Any one of: - A current Assured Shorthold Tenancy agreement (AST, PRT or SAT) to confirm cur-rent rental income; - A letter from a reputable letting agent to confirm current or expected rental income; - Valuation report received from acceptable valuer; AND in all cases Latest month s bank statement evidencing rental income OR B. Bank statements evidencing latest three months rental income (where currently in receipt of rental income, i.e. not a buy to let property purchase). Latest P60 and latest monthly pay or pension slip (latest four week s pay or pension slips if paid weekly); OR Latest three months pay or pension slips (latest twelve weeks pay or pension slips if paid weekly); AND in either case Last three months bank statements evidencing receipt of above. As per residential requirements. As per residential requirements. Latest P60 and latest monthly pay or pension slip )latest four weeks pay or pension slips if paid weekly); OR SA302; OR Latest three monthly or four weekly pay or pensions slips; AND in all cases Last three months bank statements evidencing receipt of above. Last three months bank statements from all current accounts as per credit report evidencing no income received Not applicable *Where affordability can be evidenced without the application of lower rate tax payer coverage rates, additional documentation to evidence this does not need to be sought. *Lower rate/non-tax payer status will apply to Starter, basic, intermediate rate and non-tax payers in Scotland. Sainsbury s Bank Buy to Let Lending Guide 9

10 Family purchase Please see Discounted Purchase for further information. First time buyer Applications from First Time Buyers are not accepted. At least one applicant must currently own a property in the UK prior to applying for a Buy to Let mortgage. First Time Landlords are accepted. First time landlord We will consider applications from First Time Landlords, which we define as an applicant who owns a property, but have never previously owned a Buy to Let or other rental property. Please see Current Property Ownership for further information. Foreign currency loans We only offer mortgages in pounds sterling. Freehold flats We won t accept freehold flats unless the borrower owns the freehold of the whole building, or freehold reversion/tyneside arrangements apply and there are no more than four flats in the building. Funds transfer fee A fee that is chargeable to electronically transfer the mortgage funds to the borrower or their solicitor. Gifted deposit We ll accept a gifted deposit from a family member as long as the donor confirms that the amount of the deposit is not repayable and that the donor will hold no interest in the property following completion of the mortgage. Guarantors We don t accept guarantor applications. High value tenancy We will consider applications under a High Value Tenancy, which we define as cases where the rental income exceeds 100,000 per annum from one property, the tenancy is considered to be a Common Law Tenancy as opposed to an Assured Short Tenancy. It is to be noted that the figure of 100,000 is annualised and, therefore, if the proportional monthly rental is greater than 8, per month for a shorter term (e.g. for 6 months) the tenancy is still not an AST. The tenancy agreement in this circumstance is known as a Contractual (Non-Assured) Tenancy agreement. Irrespective of whether the Tenancy agreement is an AST or Common Law Tenancy the Bank reserves the right at all times to seek a copy of the agreement. Higher and additional rate tax payers Applications where the applicant(s) are higher or additional rate (or top rate in Scotland) tax payers will be considered in line with the criteria detailed in the Affordability section. Sainsbury s Bank Buy to Let Lending Guide 10

11 The applicant s tax band will be based on all income declared during the application plus gross rental income from all rental properties, including the one that s being purchased/remortgaged. Current tax thresholds can be found on the gov.uk website. Different tax bands apply for customers whose main residence is in Scotland. Identity - Proof of Identity and Residence We use electronic verification systems to check application data against a variety of public databases. If the details don t pass these checks, then we ll need proof of ID and residency. We ll investigate gaps in voters roll information, to make sure we can confirm 3 years address history. If we can t find the applicant on our electronic verification systems, then we need to see proof of ID and residency. We need to see one document from list A in the table below (confirming the applicant s name) and one different document from list B (confirming their current address). We ll accept documents electronically through the online portal, as long as the document is legible and clearly shows all the relevant information. We ll also accept original documents by post. UK Nationals, European Economic Areas (EEA) Nationals and Swiss Nationals List A ID Documentary Evidence List B - Address Documentary Evidence Current valid full UK Passport Current utility bills, less than 12 months old (excluding those printed from the internet). Current valid driving licence (full or provisional photo card or old style full) Current council tax demand letter or statement less than 12 months old Current National or Northern Ireland Identity card Current Instrument of a court appointment (such as grant of probate). Current Firearms certificate or shotgun license Current UK based bank statement or credit/debit card statement less than 12 months old (excluding those printed from the internet). Recent evidence (obtained within the last 3 months) of entitlement to a state or local authority-funded benefit (including housing benefit and council tax benefit), tax credit, pension, educational or other grant. Copy of a Valid full UK and Northern Ireland Driving License (old style paper) Current National ID Card (EU Only) HM Revenue and Customs notice of coding (less than twelve months old) Non-EEA Foreign Nationals (With Indefinite leave to remain in the UK) Any relevant document from List A Any relevant document from List B Valid non-uk or non-european Economic Area (non-eea) passport Proof of Indefinite leave to remain in the UK Current Passport containing stamp for indefinite leave to remain in the UK Copy of current visa/residency permit (front and back for new biometric formats) Written confirmation of indefinite leave to remain in the UK from the Home Office Sainsbury s Bank Buy to Let Lending Guide 11

12 Incentives Please refer to New Build for further information. Interest only We will consider Buy to Let and Consumer Buy to Let applications made on an Interest Only or Part Capital & Part Interest Only basis. Please see the Repayment Strategy section for further information. Investment clubs We will not accept applications for Buy to Let and Consumer Buy to Let lending where the property has been sourced via an Investment Club. Lending into retirement Lending into retirement is acceptable for Buy to Let and Consumer Buy to Let mortgages, as long as the mortgage term ends before the eldest applicants 76th birthday. Lending to the retired We will consider applications from retired applicants as long as they are able to evidence that they will meet our minimum income criteria of 20,000 gross. Let to Buy Remortgage current residential to buy to let We will consider applications for Let to Buy mortgages where the applicant is looking to change their current residential mortgage to a Buy to Let. Sainsbury s Bank will also consider applications for the Let to Buy Onward Purchase of a new residential mortgage. Live/work units We don t accept live/work units. Loan purpose The following are unacceptable for the purpose Buy to Let or Consumer Buy to Let mortgages: Right to Buy properties purchased within the last 5 years and in the claw back period; Shared ownership schemes; Shared Equity schemes including Help to Buy; Self-Build Instalment Release Mortgages; Self-Certification Mortgages whereby no independent verification checks are carried out; Bridging Loans/Finance; Equity Release/Lifetime Mortgages; Interest roll-up mortgages; New applications with existing second charges (unless repaid as part of the transaction); Land Purchase for self-build; Commercial Mortgages; HMO properties; Student lets; Multi-use properties; and Holiday Lets. Loan size Minimum loan amount is 40,000 and maximum loan amount is 1,000,000. Maximum age The mortgage term mustn t go past any applicant s 76 th birthday. Sainsbury s Bank Buy to Let Lending Guide 12

13 Maximum exposure The maximum number of Buy to Let properties we will allow a customer to have is 3. For Buy to Let mortgages, the maximum lending exposure is 2,000,000, excluding any residential lending. For Consumer Buy to Let mortgages, the maximum lending exposure is 1,000,000, excluding any residential lending. Exposure rules apply to all applicants combined across all lenders. Maximum LTV and loan offered Purpose Amount of lending Max LTV Purchase and remortgage 40, ,000 75% New build flats and houses Borrowing for debt consolidation 500,001-1,000,000 60% Accepted up to 65% LTV Not permitted Minimum age All applicants must be 21 or older at time of application. Minimum income Applications for Buy to Let or Consumer Buy to Let will only be considered where the applicant has a minimum gross income of 20,000 (excluding rental income). For joint applications, this applies to at least one applicant. All income required to support this minimum requirement should be keyed, and we will need to see proof of this income. Acceptable types of income are detailed below together with the weighting that will apply. Income other than salaried or self-employed should be keyed under Other sources of income. Income Type ( 100% used) Income Type ( 80% used) Please key under Other sources of income Basic Salary Employer s Allowances (e.g. car, large town, shift) Statutory Maternity Pay/Allowance Investment income Maintenance income* Child benefit, working and/or child tax credit* Disability Allowances* Overtime Bonus Commission Rental Income from property (when applicant is not deemed self-employed). We will restrict to 100% of gross annual salary. Universal Credit (we will only accept the component parts relating to child tax credit and working tax credit)* Self-employed income (i.e. Gross Salary, dividends, drawings, profit) Sainsbury s Bank Buy to Let Lending Guide 13

14 Unacceptable sources of income We won t accept the following sources of income: Unacceptable sources of income Expenses Mileage/Fuel allowances First Aid Allowances Broadband and phone allowances Educational Grants/Bursaries Foreign currency income Stipendiary Income Housing Benefit Income support Job Seekers Allowance Bereavement Allowance Income from casual employment (other than zero hours contracts) Income from Lodgers (ie income which is not subject to a formal AST/SAT Tenancy Agreement) Trust Income Income Deductions at Source Expenditure which is deducted at source by the employer should be declared on the application as follows and keyed under Other commitments. Where the commitment has no end date, the mortgage end date should be keyed. Gross income should be keyed before deductions. Type of Deduction Student loans Car payments Attachment of Earnings Order Season Ticket Loans Other loans from employer Salary sacrifice schemes e.g. to purchase retail vouchers GAYE Private Healthcare Save as you Earn/Sharesave Scheme Personal pension contributions Included in Affordability Yes Yes Yes Yes Yes May be excluded* May be excluded* May be excluded* May be excluded* Yes but may be excluded* AVCs Minimum valuation Yes but may be excluded* *Where the applicant has confirmed that the payment is discretionary and has elected to cancel this commitment to support the mortgage payments this can be excluded. You will only require to detail this in the notes section of the application. For applicants Lending into Retirement we will not accept applications where the applicant intends to cancel the pension contribution to support. We ll only accept a bank instructed standard mortgage valuation report based upon a physical inspection of the property, carried out by a suitably qualified valuer who is a member of our panel of valuers. Applications will be accepted on the lesser of the valuation or purchase price. The minimum valuation acceptable is 60,000. A standard mortgage valuation report and rental assessment will be obtained for every application. Valuer s assessments of property value and rental yield are final. Sainsbury s Bank Buy to Let Lending Guide 14

15 Mixed use properties We don t accept applications for mixed use properties. A property is classified as mixed use if there is any element of commercial use i.e. it is used in part for non-residential purposes, such as a shop, doctor s surgery or office. This includes situations where the property itself is wholly residential but there is a commercial use of adjoining/surrounding buildings. New Build We define new build as follows: Property built/converted within the last 24 months (based on the date of the completion certificate Property not previously occupied (for converted properties that is since the conversion took place). We restrict the amount that can be borrowed against the new or newly converted property to no more than 65% loan to value. We ll also need proof that the new build/newly converted property is covered by one of the following certificates: NHBC Buildmark NHBC Solo Zurich Municipal Castle 10 New Home Warranty provided by Checkmate LABC New Home Warranty Premier Guarantee for New HomesBuilding Life Plan Ltd Buildzone CRL Management Ltd Certification by certain professional consultants may be accepted subject to it being in standard Council of Mortgage Lenders (CML) format, where the property has been built/converted within the last 6 years New build cash incentives We ll accept cash incentives of up to and including 5% of the purchase price without affecting the purchase price. If the value of the cash incentive is more than 5%, we ll deduct the balance of the incentive above 5% from the purchase price, or valuation price whichever is lowest. The following incentives are acceptable without impacting the purchase price: White goods (where not included as standard specification); Carpet and curtains; Kitchen upgrade, including tiling and worktop; Bathroom upgrade; All electric upgrades i.e. additional sockets, TV points etc; Turfing / landscaping. Non property owners Applications from non-property owners are unacceptable. At least one applicant must currently own a property in the UK prior to applying for a Buy to Let mortgage. Offer Validity Offers are valid for 180 days from the date of the first offer. Sainsbury s Bank Buy to Let Lending Guide 15

16 Over indebtedness We won t lend to applicants/existing customers who already have a high level of debt or who would have a high level of debt if they took out the proposed mortgage. We ll decline an application from applicants/existing customers who meet one or more of the following criteria. Over-indebtedness criteria Amount based on outstanding balances 1. Total unsecured debt to income > 100% 2. Revolving debt to income 75% Note: Applications are treated as an aggregate basis i.e. household level In exceptional circumstances, we might consider an appeal of an application declined on the basis of over-indebtedness, as long as the application meets all other policy requirements, including affordability. Overpayments The applicant can make regular or lump sum overpayments on their loan at any time. If there is an Early Repayment Charge, they may have to pay a charge on any regular or lump sum overpayment made. During any Early Repayment Charge period they can pay off up to 10% of the opening balance within a 12 month allowance period without charge. The first 12 month allowance period will begin from the initial completion date and refresh on every anniversary thereafter. Any overpayment made in excess of 10% of the opening balance within a 12 month allowance period, will be payable on the amount of the excess only. There are no restrictions to making overpayments after the product Early Repayment Charge period(s) have ended. Upon receipt of any overpayment, the applicant s future payments will not change unless they request it to do so. Portfolio landlords Under PRA guidelines, portfolio landlords are defined as owning four or more mortgaged let properties either on their own or with anyone else. We don t accept applications where the customer will be defined as a portfolio landlord. This includes the property attached to this application and any joint applications where one applicant would not on their own count as a portfolio landlord, but the joint property exposure of the two applicants would take them to this limit. When assessing whether a customer falls into the Portfolio Landlord space, we will only take into consideration properties held in personal names and not properties held in a company name. Porting The applicant has the right to transfer this loan to another property; this is subject to the new property and their circumstances meeting our lending criteria at that time. The mortgage is portable without requiring payment of any Early Repayment Charges except in the following circumstances: Where the amount they wish to transfer to the new property is less than the balance outstanding at the time of the transfer. Any charge will only apply to the amount of the reduction and not the whole balance outstanding. Where the applicant chooses to not transfer over your loan on its existing product terms. Sainsbury s Bank Buy to Let Lending Guide 16

17 Where the sale and purchase do not complete on the same date they will have to pay any Early Repayment Charge in full, however, we will refund this amount to the applicant, provided the date of the new purchase completes with us within 180 days of closing the mortgage on the current property. The applicant can only transfer the existing product terms up to the amount outstanding at the time of the transfer. The product for any additional amount required can be chosen from our product range at the time. Private sales Where a private sale exists, the following transactions types will be unacceptable to Sainsbury s Bank: Applications where the property has been sourced through Property Investment Clubs or where a finder s fee is being paid; Applications which involve a distressed sale; and Applications where the applicant is related to the vendor. Where a case is identified as a Private Sale, the following additional information should be gathered at the point of application: Details of how the applicant sourced the property; Details of any relationship between the applicant and vendor of the property; Evidence of deposit confirming it is coming from the applicants own resources and not in the form of gifted equity; and Confirmation that the property is being purchased at full market value and whether any incentives are involved. Probationary Employment We ll accept applicants who are on a probationary period as long as they meet the following criteria. We need to see 12 months previous track record of employment in the same sector/discipline. For details of what evidence we need to see to prove consistency of employment please see the Income and ID guide at: sainsburysbank.co.uk/intermediaries. If the applicant is in their first permanent job with a long probationary period, then they must show that they have worked for that employer for at least 12 months. Please see Income and ID guide at: sainsburysbank.co.uk/intermediaries. Property location We ll lend on properties in England, Scotland, Wales and N. Ireland. We don t lend against properties in the Channel Islands and Isle of Man. The property must be valued at 60,000 or more. Property Types Acceptable We ll only lend where we have a first ranking security over the property being purchased or remortgaged and where we re satisfied that the property is readily saleable in normal market conditions. In general, properties offered as mortgage security must be of traditional construction as determined by our valuer, be in a good state of repair and acceptable for buildings insurance. We ll consider properties of non-traditional construction on a case by case basis. We ll rely on our valuer to decide whether the property is suitable and marketable for mortgage purposes. If our valuer tells us that work is necessary to bring the property to a suitable condition for lending, we might keep back some or all of the mortgage advance until the work recommended by the valuer is carried out. Sainsbury s Bank Buy to Let Lending Guide 17

18 We won t lend on properties which: have no kitchen and/or running water; have no bath/shower and/or running water; are suffering from a progressive Japanese Knotweed infestation as determined by our valuer; are suffering progressive structural movement which requires monitoring; have on-going structural issues; have been underpinned - unless our valuer tells us that the property is structurally sound and that the appropriate certification has been obtained. Acceptable Non-traditional construction types which are reported via our valuation report: Concrete Construction; Wimpey no Fines; Laing Easiform; Pre-Cast Reinforced Concrete (PRC) where the property has been repaired under the PRC (Homes) Ltd repair scheme. These were usually built between 1945 and 1965; Large Panel Systems (LPS) are acceptable for houses and maisonettes as long as they are no more than two storeys high and subject to structural engineer s report; Steel framed houses subject to being readily marketable and mortgageable; Timber framed houses as long as they were built after 1970 with brick, reconstituted stone or rendered block work. Property Types Unacceptable We won t lend on the following types of property: bed and breakfast; farms, smallholdings and houses which are subject to agricultural occupancy restrictions; flats or maisonettes of large panel systems; flying freeholds affecting more than 25% of the property; freehold flats / maisonettes (unless the borrower owns the freehold of the whole building, subject to leases to any other flats in the building) or freehold reversion / Tyneside arrangements apply and there are no more than four flats in the building; houses in multiple occupation (a property with more than one tenancy agreement in place); houseboats/mobile homes/ park homes/ caravans; properties with restrictions such as sheltered accommodation with a minimum age limit for occupiers; uninsurable properties; properties built using high alumina cement or mundic; properties with less than 30 square meters external floor space; landlocked properties; Large Panel System (LPS) greater than 2 storeys high; properties adapted or altered for commercial use; prefabricated reinforced concrete (PRC) homes which remain unrepaired; mundic properties where the property is not graded a or a/b following a petrographic test; properties with Overage Clauses; properties with more than five acres as part of the title; properties where power lines or electricity supply apparatus are located directly over and/or on the site which are not for domestic supply to the subject property; properties with more than one annex; properties with more than one outbuilding; properties with more than 2 kitchens; Leasehold in Scotland; Fee farm grant in Northern Ireland; and Subterranean properties. Sainsbury s Bank Buy to Let Lending Guide 18

19 Regulated buy to let In addition to Consumer Buy to Let mortgages being regulated, another type of regulated Buy to Let exists. This is where the property will be occupied by the borrower or a related person, now or in the future. These applications are not accepted by Sainsbury s Bank. The Sainsbury s Bank definition of a related person is as follows A person who is: That person s spouse or civil partner; A person (whether or not of the opposite sex) whose relationship with that person has the characteristics of the relationship between husband and wife; or That person s parent, brother, sister, child, grandparent or grandchild. We may consider an application under a Second Residential Property. Remortgage criteria For remortgage applications at least one applicant must have owned the property to be remortgaged for a minimum of six months prior to the application date (but we will consider applications sooner in the case of inherited properties). Repayment methods We will accept Buy to Let and Consumer Buy to Let mortgages on a Capital & Interest Repayment, Interest Only or Part Capital & Part Interest Only basis. Please see the Repayment Strategy section for further information. Repayment strategy For mortgages on an Interest Only or Part & Part basis, a suitable repayment strategy will need to be in place. We will accept one or a combination of the following as a repayment strategy: Sale of mortgaged Buy to Let property. Sale of an alternate investment property Endowments Cash Savings (UK) Other Investments Overpayments supported by own income. If the sale of the mortgaged property is to be used as the repayment strategy, we will not require any further evidence as this will be confirmed by the valuation report. Retentions Properties must be in a ready to let condition at the time of the application, therefore, retentions on lending will not be permitted on Buy to Let or Consumer Buy to Let applications. Where a valuer has identified that a level of work is required to the property to bring it up to an acceptable condition to rent, and a retention is recommended, this would place the property outside of Sainsbury s Bank policy. Sale and rent-back Sale and rent-back transactions are not accepted and any application will be declined. Sale and rent-back is defined as a situation where a property is being purchased on a Buy to Let basis and the property is to be let to any previous owner/occupier, or any member of their family. Scottish transcripts We won t accept transcriptions of Scottish Home Reports. We always need to see a standard mortgage valuation report based upon a physical inspection of the property. Sainsbury s Bank Buy to Let Lending Guide 19

20 Self build We don t accept applications for self-build purposes. Although we will accept self-build properties once they re fully built /converted and meet our warranty requirements (please see New Build). Shared equity We don t lend on shared equity schemes where the applicant(s) won t have exclusive ownership of the property. Shared ownership We don t lend on shared ownership schemes. Tenure We ll accept Freehold, Leasehold (minimum term of 85 years must remain at the point of drawdown), Commonhold, Absolute Ownership (Scotland) and Flying-freehold up to 25%. Term Our minimum term is 5 years. Our maximum term is 40 years (or up to the applicant s 76 th birthday, if earlier) Unacceptable loan types We won t lend if the loan is for: a Right to Buy property, where the applicant wants to buy or remortgage their local authority/ housing association property and the property is subject to penalty clauses if it s sold within the pre-emption period; shared ownership schemes, where the applicant(s) will not have exclusive ownership of the property; a new application for a loan on a property with an existing second charge (unless the second charge will be repaid as part of the transaction). We don t offer the following types of lending: self-build instalment release mortgages; self-certification mortgages bridging loans; equity release/lifetime mortgages; help to buy/mortgage guarantee schemes; interest roll-up mortgages; land purchase for self-build; commercial mortgages. Unacceptable tenants The following tenant types are unacceptable: Asylum seekers; Persons who have or may acquire diplomatic immunity; Local Authority/Housing Association Tenants where the rental contributions will be made through a DWP payment; HMOs; Company Lets where the company is responsible for the tenancy agreement. Relocation allowances where the tenant is an individual and receives a payment from their employer are acceptable; Holiday Lets; Student Lets; Any tenant who retains or may acquire an overriding interest in the property, e.g. Resident Landlord. Sainsbury s Bank Buy to Let Lending Guide 20

21 Underpayments The applicant can request to reduce their monthly payments in part or in full for a period of time subject to the following criteria: They must obtain our agreement to this prior to the monthly payment; They must have overpaid in advance (see Overpayments section). However if the applicant uses any overpayments made to reduce their monthly payment or formally amend the term of the loan, then this will remove ability to underpay on future payments. The amount underpaid within a 12 month allowance period must not exceed a total of 2 monthly payments. The first 12 month allowance period will begin from the initial completion date and refresh on every anniversary thereafter. Unexpired leasehold term There must be a minimum term of 85 years remaining on the lease at the point of drawdown. Please see the Tenure section for further information. Valuation issues structural problems, specialist reports, subsidence etc. We might need to see further specialist reports dependent on the advice provided by our valuer. In this case, the applicant will need to instruct a suitably qualified specialist and pay for the specialist report. Our valuer will review the specialist report and give us advice on the suitability of the security for our mortgage purposes. Sainsbury s Bank Buy to Let Lending Guide 21

22 Valuation services and fees Standard Valuation Report This report is to give us a current market value and rental assessment so that we can decide how much we re prepared to lend on the property. The applicant shouldn t rely on this report to assess the suitability or salability of the property. Costs of Valuations Carried out by our Panel of Valuers Valuation up to Standard Valuation Report Cost including related administrative costs (incl. VAT) 100, , , , , , , , , , , ,000, ,250, ,500, ,750,000 1, ,000,000 1, Re-Inspection Valuation Report This may be required where applicants are purchasing a New Build. The valuer is required to revisit the property to validate the completion of the works and re-affirm the finalised value of the property. Re-Inspection Valuation Report There are other types of valuation reports which an applicant may wish to obtain when purchasing their property to provide more detailed information on the condition of the property or construction including subsidence, foundations, external walls, history of the property and future maintenance. Our valuers may be able to assist with this wider service the applicant is looking for and if so, they can contact them via the undernoted details:- Connells Surveying Services Ltd Valuation Management Centre Cumbria House, Hockliffe Street, Leighton Buzzard Bedfordshire, LU7 1GN Tel: Your home may be repossessed if you do not keep up repayments on your mortgage. Sainsbury s Bank plc, Registered Office, 33 Holborn, London EC1N 2HT (registered in England and Wales, no ) is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Register no ). Sainsbury s Supermarkets Ltd is an appointed representative of Sainsbury s Bank plc. LCD- A /18