Mortgage Lending Criteria

This section sets out the criteria we use to assess each mortgage application.
To view a specific criterion, click its name in the A–Z listing below.

 

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LTV limits

The LTV limits we use are as follows:

Type of loan LTV Based on
Council house purchase 80% Market value
First-time buyers 95% Purchase price
Second-time buyers 95% Purchase price
Remortgages 95% (90% where the is debt con) Market value
Buy to Let 80% Purchase price/market value
Shared Ownership 95% Purchase price/market value of share
Self Build  80% Land value
90% Final build value

Where the LTV ratio is governed by the purchase price or market value, we use the lower of the two.

Age of applicants

The Society does not have an upper age limit for mortgage lending. However, where the mortgage term expires after retirement, the age of the applicant whose income we are relying on and their ability to service the loan after retirement will be assessed.

Where the mortgage term expires after retirement, or the expected retirement age of the applicant on whose income we are relying for the loan, their ability to continue to service the loan after retirement must be assessed. This includes obtaining details of pension or other income at retirement and then assessing the applicant's ability to service the loan based on the affordability criteria.

We will not accept applications for lifetime or equity release mortgages.

The following assessment criteria will be applied to applications where the selected mortgage term runs past age 70.

If the youngest applicant is aged 70 or older on application:

  • Maximum term 25 years
  • Lending restricted to 70% LTV or under
  • Lending restricted to 50% LTV or under if term will take the applicant beyond 75 at the end of term.
  • Employed: Employed income is ignored; the applicant is assessed on pension income only. £20K minimum pension income required.
  • Self-employed, non-manual: We use self-employed income can be utilised up to age 75 plus any pension income. £20K minimum income required.
  • Self-employed, manual: £20K minimum pension income required (self-employed income ignored).
  • Cases with DWP assistance cannot be considered.

If the applicant is under age 70 on application:

  • We will consider lending above 75% LTV on an individual case basis.
  • Employed: we rely on employed income to state pension age. Thereafter pension income (evidenced) is required to cover outstanding debt. Income will be assessed in line with the affordability calculator.
  • Self-employed, non-manual: We can rely on self employed income up to age 75 plus any pension income. £20k minimum income required.
  • Self-employed, manual: We rely on self employed income to state pension age. Thereafter pension income (evidenced) is required to cover outstanding debt. Income will be assessed in line with the affordability calculator.
  • Cases with DWP assistance cannot be considered.

Term

The minimum term is five years.
The maximum term is 40 years, except Buy to Let (25 years) and residential interest-only (35 years)

Residency

Nationals of EEA Member States

Where the LTV is less than 75%, applicant(s) who are nationals of an EEA member state are considered subject to our normal lending rules, provided they have been working and living in the UK for at least 12 months and are subject to UK tax.

Where the LTV is over 75%, applicant(s) who are nationals of an EEA member state will be considered subject to our normal lending rules, provided they have been working and living in the UK for at least 24 months and are subject to UK tax.

Nationals of Non-EEA Member States

Because of the short-term nature of residency, nationals of non-EEA countries will be assessed on an individual basis.

The applicant(s) must be of a professional standing (i.e. teacher, solicitor, doctor, dentist etc.) and must be providing a deposit (minimum 25%).

Applications will be considered on an individual basis, based on employment type and potential length of stay within the UK.

Applicants who have been granted permanent rights to reside are acceptable under our normal underwriting criteria.

Identification

Applicants must produce (either to us, or to their broker) one of the acceptable forms of identity set out in the anti money laundering procedures.

The intermediary must provide copies of the documents annotated with wording similar to "I confirm this is a copy of the original document and that any photos are a true likeness of the applicant". The forms should be signed and dated by you.

For all mortgage applications we will complete a Call ML search to verify identity.

Existing borrowing members of the Society do not require identification or proof of residency.

Proof of Residence/Credit Reference Checks

We will carry out a credit search for all applicants at all known addresses covering a three-year history.

All parties eligible to vote should appear on the Voters Roll at those addresses. Where an applicant does not appear on the Voters Roll, we will need alternative satisfactory proof of residency, for a full two-year history from the date of application.

If the applicants are existing customers then no proof of residency will be required (although we will still carry out a credit check).

Any proof of residency must be original. Alternatively, copies can be accepted annotated with wording similar to "I confirm this is a true copy of the original document". The documentation should be signed and dated by the mortgage intermediary.

For CCJs, either the original Satisfaction Certificate must be seen prior to completion or the credit search must confirm that the CCJ is satisfied.

For applications where the LTV is less than 75% we will ignore CCJs/defaults that were made more than a year ago that have since been satisfied. CCJs up to £500 made within the last 12 months but now satisfied are also considered. Where the applicant has had multiple CCJ's/defaults of if they exceed £1,000 in value these should be referred prior to application.

Where the LTV ratio is over 75%, we will ignore CCJ's/Defaults that were made more than three years ago that have since been satisfied. CCJs up to £500 made over 12 months ago but now satisfied are acceptable. Where the applicant has had multiple CCJ's/defaults of if they exceed £1,000 in value these should be referred prior to application.

We cannot offer a loan if the applicant is an undischarged bankrupt or is a discharged bankrupt/IVA where the bankruptcy was discharged less than three years ago. The application can be accepted if discharge was more than three years ago and no further court orders have been registered. A copy of the bankruptcy discharge certificate or an IVA certificate of completion must be provided. Please note that a maximum LTV of 75% will be applied to all applications from discharged bankrupts.

Where an applicant has had a property repossessed by a previous lender (or instigated voluntary repossession), we will consider an application so long as the repossession was made over three years ago and if the lender incurred a shortfall debt this has been repaid in full by the applicant. The maxumim LTV considered is 75%.

We will also consider applications where the applicant has been declined by another lender in the following situations:

  • Failed the lender's credit score.
  • Failed lender's underwriting criteria.
  • Property or property type is unacceptable to that lender.

Income

As part of the FCA's Mortgage Market Review, we have to assess income by the use of an affordability calculator and appropriate evidence must be held on file. Any income being assessed must be on a net basis (i.e. after tax is deducted).

The table below provides clarification of the net income sources that we consider and the suggested method of verification:

Source Allowable Amount Verification
Self Employed Standard* 100% SA302 and two years' accounts, or accountant's reference
Self Employed Specialist 100%  SA302 and one year's accounts or accountant's reference
Self Employed Professional 100% SA302 and one year's accounts or accountant's reference
Self Employed Professional less than 1 year 100% Senior Partner/Partnership's accountant reference
IT and other Professional Contractors 100% Current and Previous Contract + three months' personal/business bank statements
Director of Limited Company** 100% SA302 and two years' accounts or accountant's reference

*Net profit or drawings: if more than 20% increase/decrease then average of last two years to be used. If accounts are more than nine months old a projection is required.
**Director's salary and dividends: if more than 20% increase/decrease then average of last two years may be used. If accounts are more than nine months old a projection is required. If net profit (after taxation) exceeds salary and dividends then net profit to be used.

Source Allowable Amount Documentation
Basic Income 100% P60 and last three months' wage slips or employer's reference
Guaranteed Overtime/Bonus/Commission*/Shift Allowance 100% P60 and last three months' wage slips or employer's reference
Large Town Allowance 100% P60 and last three months' wage slips or employer's reference
Mortgage Subsidy 100% P60 and last three months' wage slips or employers reference
Car Allowance 100% P60 and last three months' wage slips or employers reference
Police Housing Allowance 100% P60 and last three months' wage slips or employers reference
Regular Overtime/Bonus/Commission*/Shift Allowance 50% P60 and last three months' wage slips or employers reference
Secondary Employment Income** 50% P60 and last three months' wage slips or employers reference
Rental Income (derived from unencumbered properties) 50% AST and last three months' bank statements or accountant's reference/SA302
Investment Income 50% Bank statements or accountant's reference or investment statement
Tax Credit - Working/Child (CTC ****) 100% Tax Credit Documentation and last three months' bank statements
Maintenance Payment Receipts*** 100% CSA/CMS documentation or copy of court order
Pension Income 100% State/private pension documentation or P60 or bank statements
TRONC (tips) Payments 50% P60 and latest 3 months payslips or employer's reference

* Commission-only salespeople: 50% of projected commission and bonuses subject to the employer confirming that the level is likely to continue.
** Only one secondary income is acceptable and must be permanent employment and makes up full time equivalent hours.
*** As long as supported by CSA or Court Order and has at least five years left to run.
**** At least five years left to run

All documents must be originals. Alternatively, copies can be accepted annotated with wording similar to "I confirm this is a true copy of the original document". The documentation should be signed and dated by the mortgage intermediary.

Expenditure

As part of the FCA's Mortgage Market Review requirements, we will be required to assess the level of expenditure of the applicant(s) in three separate areas: committed expenditure, essential expenditure and living expenditure.

Committed expenditure

  • Loans
  • HP agreements
  • Child maintenance and CSA/CMS
  • Shared Ownership rent
  • Shared Equity loan repayment
  • Cost of repayment vehicle (interest only)
  • Credit/Store cards

For any financial commitment declared on the Mortgage Application Form plus those appearing on the credit search with an outstanding term of 12 months or more, we will deduct a sum equivalent to 12 monthly payments from the assessable income.

Where there are less than 12 months to run on a commitment, the outstanding balance will need to be deducted from the assessable income. For credit/store cards 4% of the outstanding balance will be deducted.

Essential expenditure

  • Ground rent/Service charge
  • Utility bills
  • Council Tax
  • Communication (mobiles, landlines)
  • Nursery/School/University fees
  • Insurances (life, property, pension)

Living expenditure

  • Food/groceries
  • Clothing
  • Alcohol/cigarettes
  • Recreation
  • Transport

For both essential and living expenditure, information can be provided by the applicant(s). However we will also use data from a statistical based model of The Office for National Statistics (ONS) for some categories, specifically:

  • Food and drink
  • Travel/transport
  • Housing/fuel/power and communication
  • Clothing/footwear/recreation and essential repairs

Where the applicant(s)' costing is lower than the ONS data, we will use ONS data. This is to ensure that the applicant(s) costings are realistic. However, if there is an exceptional circumstance where the applicant(s) can evidence their expenditure on a particular costing is lower (i.e. direct debit data on current account), we will consider this.

Affordability

From the expenditure data, we will work out the applicant(s)' free disposable income, which is total net income minus committed, essential and personal expenditure. Then, we will assess the monthly mortgage payment against the free disposable income to ensure the loan is affordable.

As an additional assessment of affordability, we need to stress-test the mortgage payment, for which we currently use 2% above our Standard Variable Rate.

Budget planner and affordability spreadsheet

With all applications other than Buy to Let, we will need a fully completed budget planner. We will check this against bank statements and the credit check to ensure that all commitments have been included.

Employment status requirements

Employed applicants

The applicant must not be under notice of termination of employment or notice of redundancy.

Employment must have been with current employer for at least six consecutive months at date of application, and the applicant must be on permanent staff. If they have not been with their current employer for six months, they must have been continuously employed for 12 months. If not, then three years' employment history must be provided.

We will either use the last P60 plus the three latest concurrent payslips or request a reference from the employer.

We will accept online payslips, but not handwritten payslips. Where doubt exists regarding the authenticity of the P60 or payslips an Employers Reference will be obtained.

Zero Hour Contract workers

We will accept income from applicants on a zero hours contract provided there is a minimum period of 18 months employment history in the same role.

Seasonal workers are not acceptable.

Where the employee is employed in a family firm, independent verification of the income will be obtained from the firm's accountants.

Fixed-term contract employees

Employees on a fixed-term contract are acceptable provided:

  • This is normal practice for nature and line of employment.
  • There is a reasonable history of contract employment in that type of work (two years or more) and there is at least three months left to run on current contract.
  • If less than two years' contract employment, then the current contract must have at least 12 months left to run.

Self-employed applicants

Standard
Self-employed people (including Directors and/or partners with 25% or more shareholding) must provide a minimum of two complete years' audited/certified accounts or an accountant's letter confirming the last two years' drawings, taxable income or share of net profit should be obtained. Where the accountant is not suitably qualified, we will also obtain HM Revenue & Customs tax assessments for the two-year period.

If the LTV is over 75%, the applicant must be self-employed for at least two years and the accountant must be suitably qualified (as per our procedures) and have been acting for the applicant for at least 18 months.

Suitably qualified accountants are defined as those who are either an Associate or Fellow of:

  • Institute of Chartered Accountants in England & Wales (ICAEW/ACA/FCA)
  • Association of Chartered Certified Accountants (ACCA/FCCA)
  • Chartered Institute of Public Finance & Accountancy (CPFA)
  • Chartered Institute of Management Accountants (CIMA)
  • Association of International Accountants (AIAA/FAIA)
  • Chartered Institute of Taxation (CTA)
  • Association of Accounting Technicians (AAT) – must also be a member of CTA
  • Association of Taxation Technicians (ATT) – must also be a member of CTA

If latest accounts are dated more than nine months prior to date of application, then a projection to year-end must be obtained and the applicant's accountant must confirm they accurately reflect current trading position of this business.

The accountant's reference must be signed by an appropriately qualified person; it is not acceptable that someone else in the firm has the required qualification.

Where the accountant is qualified, and the profits have increased year on year for the last two years, we may use the last year's Net Profit after taxation in the affordability calculator. Where the profits have decreased year on year we will use the last year's Net Profit in the affordability calculator. Where there is more than a 20% increase/decrease in the Net Profit or Salary and Dividends then an average of the last two years may be used.

Specialist
This is aimed at those self-employed applicants (as described above) who have been self-employed for less than the standard two years, but for at least 12 months, so that one year's trading accounts are available.

We will consider these applications so long as:

  • The applicant is still in the same line of work that they were for the previous three years.
  • The Loan to Value is 90% or less.
  • The applicant's accountant is suitably qualified in accordance with our Lending Policy.
  • Income is verified to the 12 months accounts in the first instance or via HMRC self assessments (SA302).

Professional
This is aimed at those self-employed applicants who are in a professional occupation (i.e. solicitors, architects, accountants, dentists, doctors, surveyors, pharmacists, vets, and optometrists) and are working as part of an established partnership (of at least three years);

Where there is at least one year's set of accounts for the applicant we can consider loans up to 90% LTV. The applicant's accountant should be suitably qualified in accordance with our Lending Policy. Income should be verified to the 12 months' accounts in the first instance or via HMRC self-assessments (SA302).

Where the applicant has been self-employed for less than one year but is working in such a partnership, we will consider accepting an application up to a maximum 90% LTV where the Senior Partner or the Partnership's Accountant can confirm that the partnership is trading well and is well established, the date the applicant became a partner, and the applicant's earnings to date and estimated earnings for full 12 months.

IT and other professional contractors
This is aimed at those applicants who undertake contract work on a regular basis where payments are made directly to them or via their own limited company – IT professionals, project managers, interim executives etc.

We will consider applications from these types of contractors where they have a history of contract work:

  • Where there is more than six months remaining on the existing contract then there must be a minimum of 12 months' contract history in the same type of employment.
  • If there is less than three months remaining on the existing contract then there must be a minimum of two years' contract history in the same type of employment.

In these instances annual income will be calculated as daily rate X 5 days per week X 46 weeks per annum – this allows for a 30-day period of no contract work to allow for bank holidays, annual leave and some "void" days between contracts.

In all instances a copy of the existing contract together with the last three months' personal/business bank statements and previous contracts should be obtained.

The maximum LTV will be 90%.

This contractor scheme is not available to Construction Industry Scheme (CIS) contractors.

Directors of a limited company

Where the applicant is a director of a limited company, the director's salary and dividends may be used when calculating the income figure, instead of using the net profit figure. We will need to check how many directors there are, and what shareholding they each have.

If the net profit after taxation exceeds the salary and dividends then we will use the net profit figure. This is subject to the salary and dividends being accounted for prior to calculating the net profit.

Guarantors

  • Guarantors are only acceptable where the LTV is not over 80%.
  • Any guarantor must:
    • meet the same status requirements as the applicant(s).
    • be assessed on the ability to cover the entire amount of the guarantee taking into account any existing mortgage/credit commitments.
    • be a close blood relative.
    • be a UK resident.
    • Guarantor applications will only be accepted where there is a realistic view that the applicant(s) will be in a position to service the mortgage in the future.

Maternity leave

We will obtain an employment reference where the applicant is on maternity leave and she has stated that she will return to work. The employer must confirm the date the borrower will be returning to work and the salary that she will return on. This must then be assessed on an affordability basis.

If the applicant is on maternity leave and has not stated she will return to work, her income will be disregarded from the affordability calculator.

Term into retirement

If the mortgage term goes into the applicant's retirement then two affordability assessments will need to be carried out.

The first assessment will be carried out as normal, and then the second will be carried out over the remaining term once retirement has taken place using the outstanding balance at the time of retirement and pension income provided and evidenced.

Payment history

Evidence of satisfactory conduct must be obtained for any mortgage or tenancy.

Mortgages not being redeemed

We will accept applications for loans in excess of 75% where an existing mortgage is not being redeemed in the following instances:-

  • Where the applicant's income taking into account all credit commitments is sufficient to support the new loan plus the existing monthly mortgage payment using our affordability model.
  • Where the applicants are currently renting out (or are intending to rent out) their existing property in order to facilitate the purchase of their new residential property, we will disregard the existing mortgage commitment where the rental income achieved (or to be achieved) is 125% or more of the current mortgage payment. Where the rental income is less than the current monthly payment, we can consider the application using the applicant's income taking into account all credit commitments, plus 50% of the rental income, if this is sufficient to support the new loan plus the existing monthly mortgage payments using the Society's affordability model. The rental income from the property must be confirmed either by a qualified Valuer, copy of the current Assured Shorthold Tenancy or by a member of the ARLA or NAEA.
  • Where the applicants currently have investment properties with Buy to Let mortgages and wish to purchase a residential property, we will disregard the existing mortgage commitment where the rental income is 125% or more of the current monthly payment. The rental income from the property must be confirmed either by a qualified Valuer, copy of the current Assured Shorthold Tenancy or by a member of the Association of Residential Letting Agents (ARLA). We will consider an application where the rental incomes are less than 125% of the current mortgage payment. Where there is a shortfall between the mortgage payments made and the rental income received we will consider deducting the shortfall from the borrower's income as a monthly commitment.
  • Where applicants currently have multiple investment properties with Buy to Let mortgages (maximum of 3 properties within the entire portfolio) and wish to purchase a residential property, we will disregard the existing mortgage commitments where the total rental income is 125% or more of the current total monthly payments. The rental income from the properties must be confirmed either by a qualified Valuer, copy of the current Assured Shorthold Tenancy or by a member of the Association of Residential Letting Agents (ARLA).
  • Typically for applications to purchase a second residential property the loan is restricted to a maximum of 75% LTV.

Repayment methods

The following repayment types are acceptable:

  • Repayment (capital and interest)
  • Interest Only* - we will not assign/deposit/serve a Notice of Interest in any repayment strategy; it is the responsibility of the borrower(s) to maintain an adequate repayment strategy throughout the term of the mortgage.
  • Combination of Repayment & Interest Only.

* Where Interest Only is selected, details of a suitable repayment strategy must be provided. The table below indicates the maximum loan to value limits dependent on the suitability/risk profile of the repayment strategy chosen.

 

Repayment plan Max LTV Documentation/Evidence required Assessment of Documentation
Pension 70% LTV Statement confirming lump sum payable on retirement Ensure lump sum payable covers the whole of the interest only element of the loan – this is usually a maximum of 25% of the final fund value
Stocks & Shares ISA 70% LTV Performance illustrations must be supplied Ensure the projection stated will cover the whole of the of the interest only element of the loan at the term end
Endowment 70% LTV Copy of policy showing maturity values Maturity value (including annual & terminal bonuses) must cover the whole of the interest only element of the loan – do not use guaranteed death benefit
Stocks & Shares 50% LTV Illustration of portfolio value The total value of the portfolio must be sufficient to cover the whole of the interest only element of the loan
Other Investments 50% LTV Appropriate evidence required The total value of the portfolio must be sufficient to cover the whole of the interest only element of the loan
Second Property 50% LTV We prefer the property be unencumbered. Valuation required – Rightmove valuation is acceptable. If the property is mortgaged the value and equity is required and will be assessed and referred on an individual basis Land registry check to ascertain if the property is unencumbered. Valuation or Rightmove check to cover the whole of the interest only element of the loan
Mortgaged Property 50% LTV with min 150k equity Society Sale of Mortgaged Property Declaration form Once the valuation is received, check the LTV to ensure 50% or below and calculate that there is at least £150,000 equity left in the property

Appropriate documentary evidence must be supplied to support the repayment strategy.

Inheritance and cash ISAs are not acceptable repayment strategies.

Part interest-only, part capital and interest cases
We will accept repayment on a part interest-only, part capital and interest basis. The interest-only element will be subject to the above Max LTV limits for the respective repayment strategy. The remaining balance would then need to be on a capital and interest basis.

Multiple repayment strategies
Where more than one repayment strategy is in place the max advance would be restricted to the lowest LTV for any of the strategies that are being used.

Self-build interest-only
The repayment type can be interest-only during the build period (with or without a repayment strategy). Once the property has been completed a suitable repayment strategy must be in place if the loan is to remain on interest only.
Where the mortgage is to be transferred onto a repayment basis on completion of the build, affordability must be assessed on a repayment basis. Where the mortgage is to remain on interest-only after completion of the build the cost of the repayment strategy must be included in the affordability assessment.

Self-build mortgages

We need to take into account rental or mortgage payments on the property the applicants will be living in during the build, so this will need to be shown as an expenditure item on the affordability calculator.

During the build we can assess on an interest-only basis (so long as the applicant has not chosen a repayment mortgage from the outset), but we will need to carry out a second affordability calculation based on a repayment mortgage over the remaining term (less 24 months for the build).

However, if the applicant wishes to remain on interest-only after completion of the build, they must have a satisfactory repayment strategy in place which must be evidenced. Any cost of the repayment strategy must be included in the affordability calculation.

Once the build is complete, the applicant is able to switch from a self build product to a residential retention rate available at that time. Self build borrowers who have not seen a reduction in household income since applying for their self build mortgage, and who have supplied the property Completion Certificate to the Society, will be eligible to automatically switch to C&I on a new 2 year residential mortgage scheme.

Buy to Let

Buy to Let (BTL) is not available for guarantors or first-time buyers.

BTL has a maximum 80% LTV.

Applications can be accepted from employed, self-employed or retired applicants. We will not accept applications where the applicant is in receipt of "non-employment" state benefits, including (but not limited to) Child Support Maintenance, Council Tax Benefit, Housing Benefits, Income Support (including SMI), and Jobseeker's Allowance.

The minimum income requirement for a BTL application will be £25,000 gross income. Please note that in the case of joint applicants, one applicant must earn the minimum required figure of £25,000 gross.

We only allow BTL borrowers to have three properties with us, including the one being applied for, and no more than three propeties within the total portfolio.

No multiple occupancy within self-contained units or company lets.

For our standard products, with fixed period of less than 5 years there must be minimum 145% rental cover against the monthly mortgage payment stressed at a rate of interest of either the Product Rate +2% or a minimum rate of 5.5%. For fixed rate products where the fixed product period is 5 years or longer, there must be 145% rental cover against the monthly mortgage payment based upon the payrate, no additional stressing is required.

With an application that has multiple BTL properties, we will take a total of the monthly payments across the portfolio and the total rental income across the portfolio must equate to at least 145% of the total monthly payments.

The minimum loan amount for a Buy to Let application is £75,000. The amount we lend to individual or joint borrowers cannot exceed £750,000.

Following the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 which came into force on 1st April 2018 for all Buy to Let applications the Society requires a copy of a valid Energy Performance Certificate (EPC) for the security property. The certificate must show that the property meets a minimum energy standard of E. All properties rated below this (F or G) are not acceptable to the Society and must be brought up to the required E standard before we are able to lend, evidence of a new valid EPC at the new rating will be required before a Binding Mortgage Offer will be considered. If the property is exempt from the new regulations evidence of the exemption must be provided.

Capital raising

If applicants want to raise capital, we will allow this in principle, but loan amounts will depend on LTV and the purpose of the loan.

  • If the applicant is borrowing for home improvements, any amount up to 90% LTV can be considered.
  • For debt consolidation, we will consider up to a maximum of 90% LTV, assessed on an individual basis by the underwriter. Debt consolidation is not permitted on Buy to Let applications.
  • For any other purpose we will consider a maximum additional amount of £100,000 up to a maximum 90% LTV. However this will be restricted to 75% LTV for a second-home purchase.

If the applicants are purchasing under the right to buy scheme, we will only lend extra funds for home improvements up to 75% of the valuation amount.

There is no restriction on the term of the Additional Borrowing subject to the Society's usual lending policy (this may extend beyond the main account).

Debt consolidation and credit-impaired customers

Where a customer is debt consolidating, they must sign an undertaking drawn up by the Solicitor committing them to repay the debts in full on completion of the advance (unless they have sufficient income to deduct the commitments)

Where a customer is credit-impaired the Society is unable to consider an application for debt consolidation unless they have sufficient income to deduct the commitments. A credit-impaired customer is defined as a customer who:

(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 due to errors by a bank or other third party; or
(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
(c) has been subject to an individual voluntary arrangement or bankruptcy order which was in force at any time within the last three years.

Fees
Any fees due can be paid up front and will be indicated on the application form if the borrower chooses to do so. If the fee is to be paid up front then this needs to be collected prior to issue of the mortgage offer. If the fee is to be added to the loan this must be added to the loan amount in the affordability calculator. Where a deed of postponement (see below) is administered by the Society, a fee will be charged to the applicants mortgage account – but again, they can choose to pay the fee upfront (refer to Tariff of Charges).

Solicitors
Applicants need a solicitor in these circumstances:

  • purchases of land and transfers of equity
  • staircasing on Shared Ownership properties.
  • Debt consolidation (unless they have sufficient income to deduct the commitments).
  • All debt consolidation for credit impaired customers
  • Repaying second charges

If solicitors are required their costs must also be met by the applicants.

What is a Deed of Postponement?
The Society cannot advance money unless it has first claim to the security related to the advance in the event of default. The Society requires an agreement to be made with an existing lender who has a charge registered against the property, to agree to allow the Society prior claim on the security, in the event of default and property sale. Where an application is made on a previous Right To Buy purchase and the pre-emption period still applies the Society will require a Deed of Postponement regardless of the purpose of the loan.

What if the main account has been in arrears?
Please refer for guidance. The account must have been up to date for a minimum of the last 12 months.

Property types

We will lend on most types of owner-occupied property in England and Wales, except maisonettes or prefabricated reinforced concrete houses, which will only be acceptable if repaired under an approved scheme before we releases our advance.

We will consider lending on properties that have an annex included as individual living accommodation for a dependent relative on residential mortgages only. We will not consider this option on BTLs.

We will lend on freehold and leasehold property. If leasehold, there should be a minimum of 85 years remaining on the lease at the commencement of our advance.

For New Build flats, we will lend up to 75% LTV in Norfolk, Suffolk, Cambridgeshire, Hertfordshire, Essex and London. For other areas or for higher LTVs, these are on a ‘by exception basis’ so, please contact the Intermediary Support Team on 0330 123 1073.

We will not lend on the following:

  • Studio Flats
  • Flats above Commercial premises (other than shared ownership and by exception)
  • Ex local authority flats/maisonettes (except RTB cases)
  • Flats where the block is over 5 storey's high
  • Basement flats for BTL properties

If the property was built within the last 10 years it should carry either:-

  • NHBC Buildmark Certificate
  • Checkmate 10 Home Warranty
  • Premier Guarantee
  • Building Life Plans
  • Buildzone
  • Zurich Municipal
  • LABC New Home Warranty

OR

  • Be built under the supervision of a suitably qualified architect or surveyor, as detailed below:

Where the property is being supervised by a qualified person, the conveyancer must ensure the supervisor is a member of one of the following professions:

  • Royal Institute of Chartered Surveyors (FRICS or MRICS)
  • Institute of Structural Engineers (F.I.Struct.E or M.I.Struct.E)
  • Chartered Institute of Building (FCIOB or MCIOB)
  • Association of Building Engineers (FB.Eng or MB.Eng)
  • Chartered Institute of Architectural Technologists (MCIAT or TCIAT)
  • Architect registered with the Architects Registration Board (ARB). Must be registered with ARB even if also a member of another institution for example Institute of the Royal Institute of British Architects (RIBA)
  • Institute of Civil Engineers (FICE or MICE)

Mortgage valuations

For all purchase and remortgage applications we will require a full mortgage valuation.

Vendor-paid/gifted deposits

Vendor-paid deposits
In some circumstances vendors may pay the deposit for the applicant, maximum 5%. These cases are acceptable where it is a developer paying the deposit as part of its marketing activity and where the valuer confirms the full valuation of the property. For a small independent builder we will require written confirmation from the builder that paying the deposit is part of its marketing activity. The applicant must also provide a 5% deposit.

Vendor deposit paid schemes are acceptable where the payment represents a maximum of 5% of the purchase price subject to the valuer confirming the full valuation of the property. The applicant must also provide a 5% deposit.

Gifted deposits
For applications up to 95% LTV we will accept 100% gifted deposit where the monies are clearly evidenced in a UK bank/Building Society account or other investments and from a close family member – for example, parent, grandparent, son, daughter, brother or sister.

Where above 90% LTV the applicant needs to have been maintaining rental payments for at least the previous 12 months.

The donor should confirm (in a letter) that the monies are a gift and as such are non-repayable, and that they will retain no interest in the property. A gifted deposit form will need to be completed, available on our website.

Proof of the deposit will be required.

Where the gift is being provided through a reduction in purchase price of a family property, this is acceptable, but the loan will be processed as a transaction at undervalue. Where the gift is significant (i.e. in excess of £100,000) the applicants should confirm that appropriate Inheritance Tax Planning advice has been sought; where the gift is through a reduction in purchase price of a family property the solicitors acting in the transaction should confirm that Inheritance Tax Planning has been implemented.

Proof of deposit

We will require proof of deposit showing a build up of funds over a reasonable period of time.

Properties being purchased from relatives

Where a property is being purchased from any of the applicant's relatives, the valuer will be advised that the vendor is a relative of the applicant and the true market value of the property must be obtained.

In addition, we will ask the solicitor to ensure that:

  • the vendor vacates the property prior to or on completion and that they will have no further interest in the property
  • as far as the Solicitor can tell, this is a true sale; all of the purchase monies must pass through the solicitor's client account
  • if the loan is a transaction at undervalue, the solicitor must ensure that our interests are fully protected and an appropriate indemnity insurance is in place prior to completion of the advance.

We cannot accept applications where the deposit monies are also being provided by the vendor.

Solicitors panel

We maintain a panel of solicitors and have agreed to utilise the Building Society Associations website for our lender instructions.

If, at underwrite stage, a solicitor is not yet registered on our panel, they will need to apply.

Solicitors will be removed from the panel if not instructed by us within a 12-month period.

Shared Ownership

We lend up to 95% LTV (of the share) on houses and flats
We must have ability to staircase to 100%
Minimum share 40% - please refer if lower
New build acceptable – including flats
Open Market Shared Ownership considered (on a scheme by scheme basis)
Properties above commercial premises acceptable

Fees

Under the MMR requirements, fees are not automatically added to the loan on completion. The borrower(s) should indicate on the application form whether they would like to add the fees to the loan on completion or they may choose to pay the fees upfront so as not to incur any additional interest charges.

Zero Hour Contracts

We will accept income from applicants on a zero hours contract provided there is a minimum period of 18 months employment history in the same role. We will also require a P60.