Vernon Building Society Lending Criteria Adviser Guide February 2018 THIS DOCUMENT IS FOR PROFESSIONAL MORTGAGE ADVISERS USE ONLY
Tom Gurrie Intermediary Sales Manager 0161 429 4327 07803 409645 tom.gurrie@thevernon.co.uk Kevin Baggs Mortgage Underwriting Manager 0161 429 4323 kevin.baggs@thevernon.co.uk Jessica Taylor Senior Underwriter 0161 429 4300 jessica.taylor@thevernon.co.uk Contents Page Lending Area 3 Residential Loan Criteria 3 Interest Only 3 Affordability 3 Family Assistance 4 Employed applicants 4 Self-employed applicants 4 Retirement 5 Other income 6 Credit History 7 Property 8 Documentation 9 Buy to let 10 Solicitors 11 2 P a g e
Lending Area Applications accepted from brokers that are based within the following postcode areas: BB, BD, BL, CH, CW, FY, HD, HX, L, LS, M, OL, PR, S, SK, ST, WA, WF and WN Property to be used as security must be in England or Wales Residential Loan Criteria Minimum purchase price 80,000 Minimum Loan 25,000 Maximum term 35 years Minimum term 5 years Maximum loan amount <80% LTV 1.5m 80-85% 400k 85-90% 350k 90-95% 300k Max LTV Residential BTL Retirement mortgage Part I/O & Part C&R Acceptable repayment vehicles Interest Only 60% 70% 50% 80% (interest only element max 50% of total borrowing) Regular savings plan Sale of assets (sterling only) Periodic capital repayments Sale of mortgaged property (where plausible downsize plan) The Society will review any proposed repayment plan for plausibility Affordability Our affordability calculator must be completed and submitted with the case. Available on our website: http://www.thevernon.co.uk/mortgage/calculatoradvanced.aspx Essential expenditure that would be difficult to reduce in times of stress should be used in the calculation 3 P a g e
Gifted deposit Guarantor mortgages Joint family borrower / sole ownership Family Assistance Accepted Accepted affordability assessment must show the borrower can meet at least 70% of the repayment Account taken of term/age as well as status of guarantor Accepted Employed Applicants Minimum employment period 3 Probation period Can process loan but will not complete it until employer confirms permanent position >80% LTV Employers reference requested Income treatment: Salary Guaranteed regular income Car allowance Guaranteed shift allowance Non-guaranteed income Evidenced by Minimum continuous employment 12 % used in affordability calculator 100% net income 100% 100% 100% 30% - Secondary (100% if 3 years history evidenced) Last 3 salary advices Plus most recent P60 for guaranteed regular income or last 3 years P60s for nonguaranteed income Income treatment Self-Employed Applicants Average of last three years (or two plus projection) net profit Evidenced by Acceptable accountancy bodies If an individual moves from employed to selfemployed in the same field of work then one year s accounts plus two prior P60s will be acceptable proof of earnings Three years accounts and HMRC SA302 certificate and tax calculations The Institute of Chartered Accountants The Chartered Association of Certified Accountants The Chartered Institute of Public Finance Accountants The Chartered Institute of Management Accountants 4 P a g e
Limited company directors Shareholding >20%: an average of the last three years (or two plus projection) share of net profits and director s remuneration Evidenced by three years audited accounts and HMRC SA302 certificate and tax calculations Shareholding< 20% (salaried director): Current salary, plus an average of the last three years share of any profits received Evidenced by last 3 salary advices and accountant s letter confirming share of profits Sub-Contractors Eighteen continuous service in same type of employment with min. 6 remaining on current contract We accept the gross value of the annual contract or an average of the last 3 income Evidenced by copy of current contract and/or CIS payment and deduction certificate If pays own tax or sub contracts to more than one company we will treat as self employed Lending into Retirement Pension provision assessment depends upon length of time before retirement and how long the loan term extends into retirement: Period from retirement Proof of income Underwriting approach < 10 years to retirement and/or loan extends > 5 years beyond retirement Evidence of pension income Affordability based on lower of earned or pension income > 10 years from retirement and extends < 5 years beyond retirement Applicant already in retirement Evidence of pension contributions and Lending into Retirement declaration (available on website) Evidence of pension income Affordability based on earned income Based on pension income. Consideration given to whether index linked depending upon the term 5 P a g e
Retirement Product Selection Matrix Interest-only Interest-only Capital & Interest repayment NOT from the mortgage property repayment from mortgaged property Standard products Standard products Standard products Age 75 or less at maturity CeMAP (or eq.) advisers CeMAP (or eq.) advisers CeMAP (or eq.) advisers Standard products Standard products Retirement products 76 85 at maturity CeMAP (or eq.) advisers CeMAP (or eq.) advisers CeRER advisers Retirement products Retirement products Retirement products Over 85 at maturity CeRER advisers CeRER advisers CeRER advisers
Investment Income Other Income Treatment Primary Disability Living Allowance Working Tax Credit Carer s Allowance Child tax credit Income from family living in property but not on mortgage Income from lodger (not family) Rental Income Pension Income <80% LTV - secondary >80% LTV not included <80% LTV - secondary >80% LTV not included <80% LTV - secondary >80% LTV not included Secondary Not included Primary Primary Primary Contract workers Primary if backed by copy of contract / last 3 pay slips and up to 3 years P60s to support continuity of earnings and the affordability assessment Maintenance Secondary if court order available Original documentary evidence required for all of the above to be factored into affordability calculator 6 P a g e
Credit History acceptable levels subject to adequate explanation/evidence Below 80% LTV CCJ s Maximum of 3 Less than 500 in total Satisfied 6 or more Certificate of satisfaction required if not on credit search CCJ s issued within the last 3 years are not acceptable if over 500 Late Maximum of 3 payments separate late excluding payments within the mortgage last 12 payments Above 80% LTV Maximum of 2 Less than 500 in total Satisfied 12 or more Certificate of satisfaction required if not on credit search CCJ s issued within the last 3 years are not acceptable if over 500 Maximum of 3 separate late payments within the last 24 Late mortgage Maximum of 1 within the last 12 payments Previous good history Missed None registered within payments the last 12 up to level 3 Payments brought up to date for at least 6 Missed None registered within payments the last 24 up to 6 Payments brought up to date for at least 6 Defaults None registered within the last 24 Defaults cleared for 6 or more Less than 5,000 in total Bankruptcy Considered if discharged over 5 years IVA Cleared for at least 6 Not registered in the last 3 years Less than 10,000 in total None within the last 12 Previous good history None registered within the last 12 Payments brought up to date for at least 12 None registered within the last 24 Payments brought up to date for at least 12 None registered within the last 24 Defaults cleared for 12 or more Less than 5,000 in total Not considered Cleared for at least 12 as long as effected over 3 years ago Less than 5,000 in total 7 P a g e
Debt relief order Pay day loans Cleared for at least 6 Not registered in the last 3 years Less than 10,000 Maximum of 3 in the last 12 Cleared for at least 6 Cleared for at least 12 as long as effected over 3 years ago Less than 5,000 in total Maximum of 1 in the last 12 Cleared for at least 6 Age Tenure Flats Construction Generally unacceptable security Property Any, subject to valuation Freehold Leasehold a minimum of 50 years to remain at end of mortgage term Maximum 6 storeys (over 4 storeys must have lift) All standard construction types subject to satisfactory valuer s comments and insurability Non-standard construction should be referred Listed under the Housing Defects Act Agricultural restrictions/ties Local Authority flats and maisonettes System-built concrete construction Steel clad properties Pre 1990 Steel Frame properties Pre 1970 Timber Frame properties Prefabricated/(pre) reinforced/poured or shuttered concrete construction Unconventionally clad i.e. not brick, concrete or stone block Easi-form construction Pre-1970s no-fines concrete Mundic block High alumina cement Timber construction Properties built on contaminated land Flying Freehold Right to Buy Self-Build 100% Not Accepted / may consider if partial and evidence of mutually enforceable covenants for support & maintenance Accepted up to 100% of concession price Land 75% ltv max Stage 1 (wall plate) up to 35% of remaining balance Stage 2 (roofed in) up to 15% of remaining balance Stage 3 first fix & plastered up to 25% remaining balance Stage 4 final completion remaining balance release. Stage inspections by Society valuer 8 P a g e
Stage payments made in arrears Structural Warranty required Self-Build (cont.) Documentation: Plans and elevations Detailed costings Copy of Planning permission Copy of Building Regulation approval Schedule of works including dates Details of the structural warranty Evidence of capital the applicant has available Details of residence during the project (rent/mortgage/caravan etc.) New build Up to 95% I.D. Proof of income (certified copies) Documentation We will carry out an electronic search against records held by a credit reference agency to verify name and address. To support this we will require one identity document from the list below (certified copy): Current UK & EU passport Current photo full or provisional driving licence Current old style driving licence Current firearms certificate Current armed forces ID card EU state ID card Current UK disabled driver s pass Instrument of a court appointment ID card issued by Electoral Roll Office for Northern Ireland HMRC tax notification Housing benefit notification * Local authority tenancy agreement * Council tax demand letter or statement * Tax credit * DWP state pension document * Utility bill ** Current original bank statement ** Current original credit/debit card statement ** Mortgage statement * * These documents must be dated in the past 12 ** These documents must be dated in the past 6. Last 3 month s payslips and most recent P60 or Last 3 years accounts or 3 years SA302s Last 3 consecutive bank statements If applicable state and/or company pension statements 9 P a g e
Additional documentation where relevant Intermediary CeRER certificate (applies only to Retirement mortgages) Customer Into Retirement Declaration Key Facts Illustration Affordability calculator Proof of deposit Evidence of repayment vehicle Interest Only Right to Buy notice Building work estimates and planning permission approval AST and Lender approval to let (where BTL exist) Payment of Fees Please note that we can accept certified scanned and emailed copies, however these should be sent through a secure email. Please contact us if you wish to set up a secure email exchange Acceptable BTL segments Loan purpose Landlord experience Min/Max age New build? Purpose build flats? Let to Buy Lending Limits Min/Max term Buy to Let Investment BTL < 4 properties Investment BTL 4+ properties (portfolio) Personal ownership Ltd Company Regulated BTL (MCOB/MCD) HMOs Holiday Lets Purchase Remortgage Capital raising Experienced BTL landlords and investors preferred. For new entrants to the market, their knowledge and experience of the property and financial markets will be taken into account. Through underwriting process all applicants will be assessed to ensure they seem competent Minimum 18 Max: none Yes Yes Let to buy will be considered, noting that such arrangements will generally fall under the MCD regulations 3/25 years Min/Max loan Max LTV 70% Interest Cover Ratio (interest only) 25,000 / 1.5m (consolidated) 130% 10 P a g e
Stressed interest rate Tenancy agreement Consolidation (overall LTV for portfolio) Affordability Assessment Detail of existing properties/loans Accounts/business plans 5.95% AST 6 Yes Investment Property Loans In all cases actual costs will be used to assess affordability assuming a stressed rate and future tax position. Other earned income can be taken into account a full I/E would be required For portfolio landlords (4 or more properties) Portfolio Analysis spreadsheet of all existing BTL properties with details of their loans, interest rates and rents is required. This will have a stressed interest rate applied to ensure portfolio affordability MCOB & MCD Regulated Loans Full details of all income/expenditure required. This will be assessed using stressed mortgage rates Required Required for portfolio landlords (4 or more properties) Solicitors Borrower s solicitor can provide dual representation providing practice is at least a dual partnership and where Law Society guidelines permit joint representation Solicitors acting for the Society must have professional qualifications and professional indemnity insurance of at least 1m (or the amount of the loan if higher) 11 P a g e