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Lending Criteria

 

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Adverse Credit


Bankruptcy / IVA

The Society will not lend to un-discharged bankrupts.

The society will consider an application where an applicant is a discharged bankrupt or has completed and IVA more than 3 years ago and no further court orders have been registered or further payment issues identified on any standard product.

A copy of the discharge certificate or an IVA certificate of completion must be provided.

Lending will be restricted to a maximum LTV of 75%.

Repossession

Where an applicant has had a property repossessed by a previous lender (or instigated voluntary repossession) the Society will consider an application so long as the repossession was made over 3 years ago and if the lender incurred a shortfall debt this has been repaid in full by the applicant.

Evidence from the lender who took possession that there was no shortfall or the shortfall has been repaid in full should be obtained.

Lending will be restricted to a maximum LTV of 75%.

CCJ’s & Defaults

- All cases with adverse must be satisfied for at least 12 months before we will consider lending

- Any cases that are FTB, RTB or Shared Ownership must have a clean credit report.

For applications where the LTV is less than 75% we will:

  • Ignore CCJ’s / Defaults made more than 1 year ago which have since been satisfied
  • Where the applicant has multiple CCJ’s, defaults or they exceed £1000 in value refer to underwriting

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 ratio is over 75% we will:

  • Ignore CCJ’s/Defaults that were made more than 3 years ago which have since been satisfied
  • CCJ’s up to £500 made over 3 years ago but now satisfied are acceptable
  • Where the applicant has multiple CCJ’s, defaults or they exceed £1000 in value refer to underwriting

The original Satisfaction Certificate must be seen prior to completion or the credit search must confirm that the CCJ is satisfied.

Late payments, exceeded limits and arrears on credit agreements

Late payments should be reviewed on a case by case basis and consideration should be made to:

  • The number of payments that have been made missed
  • The frequency of the late payments
  • The number of accounts that are showing late payments
  • When the late payments occurred (are they historic or current?)

Exceeded credit limits on accounts should be checked and reviewed on a case by case basis and consideration should be made to:

  • The number of occasions the limit has been exceeded
  • The frequency of excesses
  • The number of accounts showing excesses
  • The amount of the excesses

Payday Loans

The use of payday loans will be reviewed on a case by case basis and consideration should be made to:

  • The frequency of use
  • The amount of the borrowing
  • When they were last used (are they historic or current?)

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

  • Failed the lenders credit score
  • Failed lenders Underwriting Criteria
  • Property or property type is unacceptable to that lender

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 3% above our Standard Variable Rate, except for Buy to Let and Holiday Let which will be stressed at 2%.

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.


Buy to Let (BTL)

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

The applicant does not need to own their own home, but must have held a mortgage in the past.

BTL has a maximum LTV of 80%.

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 let properties with us, including the one being applied for, and no more than three let propeties within the total portfolio.

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

Capital raising may be permitted provided that the reason is acceptable to us. Debt consolidation is not permitted on Buy to Let applications.

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.

We require a valid Energy Performance Certificate (EPC) confirming that the property meets the minumum required standards for energy efficiency (rated E or above).

Debt to income (DTI)

When assessing an application, we will total all the applicants debt (secured and unsecured) that they will have when our mortgage has completed and divide this by their total assessable income. We will generally not lend if this calculation results in a multiple of more than 10.

BTL transitional arrangements

The Society may offer transitional arrangements for Buy to Let applicants, subject to the following conditions:

The existing mortgage MUST be an existing Buy to Let contract and NOT a residential contract with consent to let

The existing mortgage must have completed prior to 1st January 2017

The remortgage must be in the same names as the existing mortgage contract i.e. no adding or removing a party

Portfolio landlords are excluded.


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.
  • Second home purchases can consider up to 80% LTV, that £100,000 limit does not apply anymore.

Debt Consolidation: The Society is currently unable to accept an application to consolidate debts. This includes the repayment of second charge loans.

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).

Capital raising 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.

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


CCJ

Synonym of Adverse Credit.


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:

  • The applicant has a minimum of 3 months remaining on the current contract
  • The applicant has a minimum of 2 years contracting history and can evidence contracts throughout the COVID pandemic

Evidence of 2 years contracts will be required, along with a copy of the current contract and 3 months personal/business bank statements showing the income.

Calculating Contractors Income

Up to 80% LTV – Applicants day rate x 5 days x 46 weeks = Annual income for assessment

Above 80% LTV – For loans above 80% LTV Day Rate Contractors will be assessed under our Standard Self Employed criteria and therefore the income to be used for assessment will be calculated by using an average of the last 2 years Salary + Dividends, shown on the applicants SA302/Tax Calculations (Please note, if the latest year is lower we will use this figure rather than the average).

The maximum LTV for day rate contractors is 85% and the income is not currently accepted on Shared Ownership applications.

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


Debt consolidation

The Society is currently unable to accept an application to consolidate debts. This includes the repayment of second charge loans.



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