ESTABLISHING NEEDS INCOME. Loans & Credit Cards. Deposits & Gifted Deposits. Certifying Documents

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1 ESTABLISHING NEEDS INCOME Income Expenditure Deposits & Gifted Deposits Loans & Credit Cards Certifying Documents

2 ESTABLISHING NEEDS INCOME Employed 3 months or 13 weeks payslips. Net amount on the payslip appears on the corresponding bank statement for a consecutive three month period. The most recent payslips must be obtained at the time of the fact-find & not the application. Where less than 3 months payslips available, i.e. new job. Upload a copy of offer letter or contract with any available payslips.

3 ESTABLISHING NEEDS INCOME Self Employed A paper SA302 or its online equivalent for each year which confirms the clients total taxable income, must be provided and uploaded. HMRC are phasing out the production of paper SA302s, so moving forward clients who submit their tax return online will need to obtain an equivalent online tax calculation and tax year overview from the Government Gateway. Where paper SA302s are still available the latest of these must be dated within eighteen months of the date of the application. For any paper SA302s a 'Tax Year Overview' is not required by Intrinsic (but may be required by the lender). Online Tax Calculations must be supported by a Tax Year Overview as evidence of self-employed income. Tax Year Overviews can be printed from an online Self-Assessment account on the HMRC gateway system.

4 ESTABLISHING NEEDS INCOME Where SA302s are not available o Copies of online submissions using accountant s software are acceptable providing it is clear from the documents the return has been submitted to HMRC. o The client must also provide a copy of their Tax Year Overview. Where a client doesn t submit their tax returns online o A letter of confirmation from the client's accountant confirming the dividends and earnings for the last two years (tax years or company financial years). o Copy of bank statements from the company evidencing the dividends taken, where possible cross referencing these to the client s personal bank statements to support the accountant's confirmation.

5 ESTABLISHING NEEDS INCOME State Benefits Obtain a copy of the award letter for each benefit dated in the last 12 months. Check that the weekly or monthly credit amounts, appear on the corresponding bank statement for a consecutive three month period.

6 ESTABLISHING NEEDS INCOME Buy-To-Let Income o For any Buy-to-Let income used to assist affordability; proof of rental income and expenditure relating to the buy to let property are required. o This should be in the form of 3 months bank statements. These bank statements must be uploaded to the XPM case file.

7 ESTABLISHING NEEDS INCOME Pension Income Employer pensions last three monthly payslips, State pensions - a copy of the award letter (dated in the last 12 months) Other type of pension a statement dated in the last 12 months showing the; o Amount payable o Regularity of the payment o Gross amount If the pension provider does not pay income monthly (but rather every 6 months or annually) other evidence is acceptable, i.e. - P60 and corresponding bank statement confirming receipt.

8 ESTABLISHING NEEDS EXPENDITURE Income Expenditure Deposits & Gifted Deposits Loans & Credit Cards Certifying Documents

9 ESTABLISHING NEEDS EXPENDITURE The last three months consecutive bank statements for each applicant showing regular outgoings must be obtained. Where the applicant has more than one account for income and expenses a copy of each account statement must be obtained. o From these statements, you must identify all fixed expenditure such as mortgage, rent, utilities, phone, TV, council tax, insurance policies, savings, child care, memberships, subscriptions, maintenance, pensions, loans, credit cards, store cards, catalogue payments, lottery, broadband.

10 ESTABLISHING NEEDS EXPENDITURE o For annual commitments such as car insurance, car tax, etc. - you should calculate and include an average monthly amount. o You also need to establish and include monthly amounts for housekeeping, toiletries, socialising, personal upkeep, travel, cash, etc.

11 ESTABLISHING NEEDS EXPENDITURE Verify expenditure against last 3 months bank statements Financial Crime look for inconsistencies in bank statements, payslips etc.

12 ESTABLISHING NEEDS DEPOSITS & GIFTED DEPOSITS Income Expenditure Deposits & Gifted Deposits Loans & Credit Cards Certifying Documents

13 ESTABLISHING NEEDS DEPOSITS Accumulated Savings Obtain and verify evidence by obtaining copies of documentation showing where the deposit has been held and how the deposit was accumulated. o for example, a savings account showing the accumulation of savings (over a 3 month period or the respective time of the saving whichever is shorter). The overarching control is that you as the adviser must satisfy yourself that the deposit is feasible, plausible and realistic even where the evidence meets the above criteria. File notes will help explain where a deposit has come from

14 ESTABLISHING NEEDS DEPOSITS Evidencing Lump Sums to be used for a deposit Any Lump sums received into the client s bank account for the purpose of deposit should also be verified by the client s bank statements. If the proceeds are from the sale of an asset then contract notes or withdrawal confirmation should be obtained from the provider.

15 ESTABLISHING NEEDS DEPOSITS New Build Cases* o If timescales are tight and obtaining a proof of deposit (including evidence of the help to buy loan where applicable) might cause delays you are permitted to proceed with the mortgage application. o However you must upload a file note to notify business assurance that this evidence is lacking and the rationale for this. The proof of deposit / evidence of the help to buy loan must be uploaded prior to the completion of the mortgage. *September Compliance Bulletin

16 ESTABLISHING NEEDS GIFTED DEPOSITS You must record a gifted deposit letter from the person making the gift to confirm: it is a gift where the gift has come from that the gift is not repayable o o o Gifted deposits of more than 10,000 must be verified by the client s bank statements and those of the donor; to demonstrate the transfer of funds. If the donor does not want to transfer the gift until mortgage completion or is transferring it directly to the solicitor, this can be confirmed in the gifted deposit letter and no requirement to evidence the funds in the client s bank account. (i.e. the gift will be deposited in the name of recipient s bank account / name of solicitor s bank account prior to the mortgage completing). Do not require evidence of how the funds were accumulated in the donor s account.

17 ESTABLISHING NEEDS GIFTS OF EQUITY Where a client is benefiting from a 'gift of equity' e.g. a parent selling their property to a son or daughter at lower than market value. You should obtain a letter from the donor to confirm that the equity is a gift and it is not repayable

18 ESTABLISHING NEEDS LOANS & CREDIT CARDS Income Expenditure Deposits & Gifted Deposits Loans & Credit Cards Certifying Documents

19 ESTABLISHING NEEDS CREDIT CARDS & SOURCES OF CREDIT Credit Cards Paid Off Monthly Where a client generally clears the balance of their credit card each month, it is important that we have this documented in current arrangements with a 0 balance. Clients may not always tell you about all the sources of credit they have. Ensure that any loans, credit cards and finance arrangements that are on the bank statements are recorded in the fact find. Ensure details of available credit sources is the same in the fact find as in the application.

20 ESTABLISHING NEEDS LOANS Loans reaching the end of their term If a current credit arrangement is about to end, or will have ended at the point of application. It s important that this is disclosed and notes to reflect that this won t be an ongoing commitment throughout the early term of the mortgage Record details If a loan is to be repaid (i.e. debt consolidation) in the fact find.