Affordability
Affordability Test

The Society will apply an affordability test to ensure that the applicant can afford the mortgage repayments.

The Society maintains a model which it uses for calculating affordability. The model will default to ONS figures if the figures are not inputted or are lower than the ONS figures.

 The maximum Loan To Income ratio that can be considered is 4.49x the combined income of all applicants that are present on a mortgage application.

The affordability calculator result relating to the % of disposable income, must be a pass in order to be acceptable.

Please note that the above Loan to income restrictions will not apply on affordability assessments for pound for pound remortgages.

Evidence of Mortgage/Rent Payments

If a profile of the mortgage payments is not available on the credit search, evidence of the last 12 months’ payments is required from a lender's statement and/or bank statements.

  • For applicants in rented or shared ownership accommodation at the time of application, evidence of 12 months’ rent payments is required
Applicants
Acceptable Identification Documents

The table linked below lists the types of document that can be accepted to verify identity. We require one item from list 1 and one item from list 2.

Acceptable Identification Documents

If the applicant(s) have recently moved house and none of the above documents are available showing their current address, we require a solicitor’s letter confirming recent house move and one of the above documents to verify previous address.

Applications via Introducers

The Society will accept Introduction Certificates from FCA regulated introducers.

Applicants Unable to Act for Themselves / Vulnerable Persons

The Society will accept applications from individuals who are unable to act for themselves due to either physical and / or mental incapacity. Applications can be accepted where there is either a Power of Attorney or Court of Protection Deputy in place, subject to the following:

  • The Power must be a Lasting Power of Attorney, an Enduring Power of Attorney signed before 1 October 2007, or a General Power
  • Applicants cannot act as Attorneys for each other
  • In England and Wales an Attorney cannot act on behalf of more than one applicant. If both applicants wish an Attorney to act, each must appoint a different person to act on their behalf
  • Certified copies of the relevant documents (LPA, EPA, Court Order etc.) must be provided
  • Attorney(s) and Deputy(s) must be identified in accordance with the Society’s Customer Due Diligence procedures
Credit History

An applicant's previous credit history is a strong indicator of the future conduct of any proposed loan.

Applicants must satisfy the following criteria:

Mortgage applications up to 80% LTV:

  • No missed payments in last 12 months on any (previous or current) mortgage, other secured loan or rent, and no arrears in months 13-24 (counting backwards from the present date), where the cumulative amount overdue at any point reached three or more monthly payments. No current arrears
  • No more than 1 missed payment in last 12 months on any (previous or current) unsecured loan or credit card, and no arrears in months 13-24 (counting backwards from the current date), where the cumulative amount overdue at any point reached three or more monthly payments. No current arrears
  • Applicants should not have been subject to a Bankruptcy order within the last three years
  • Not being subject to a repossession within the last six years
  • Applicants should not have been subject to an IVA (or Debt Management Plan) within the last three years
  • A maximum value of CCJs registered more than three years prior to application of £5,000 and a maximum number of two instances. CCJs must have been satisfied at least six months prior to application
  • A maximum value of defaults registered within three years of application (whether satisfied or not) of £1,000 and a maximum number of three instances
  • A maximum value of defaults registered more than three years prior to application (whether satisfied or not) of £5,000 and a maximum number of three instances.

Other than that:

  • Three or fewer Communication supplier defaults of up to £150 each may be ignored for the purpose of calculation value under points 3 and 4 above (where an applicant has four or more, all of them will be taken into account)

A satisfactory explanation for any adverse credit (including any disregarded under point (a) must always be obtained.

For Mortgage applications above 80% LTV, applicant(s) must satisfy the following criteria:

  • No missed payments in last 12 months on any mortgage, other secured loan or rent and no more than 1 missed payments in the last 2 years. No current arrears
  • No more than 1 missed payment in last 12 months on any unsecured loan or credit card and no more than 2 missed payments in last 2 years. No current arrears
  • CCJ(s) with a total not exceeding £2,500 registered more than 3 years ago are acceptable if satisfied more than 12 months ago.
  • Defaults – one or more with a total value not exceeding £500 issued more than 12 months ago are acceptable, as long as satisfied by time of application
  • Bankruptcy – must have been discharged more than 6 years ago and all credit conducted satisfactorily since then
  • IVA (or Debt Management Plan) – must have been discharged more than 3 years ago and all credit conducted satisfactorily since then
  • Not being subject to a previous property repossessed within the last 6 years
Credit Search and Voters Roll

A satisfactory credit search and voters roll search must be undertaken. Each applicant should be registered on the voters roll at each address they have had during a minimum of the last 3 years.

In circumstances when an applicant does not appear on the voters roll, a satisfactory explanation must be provided and proof of residency must be established at each address during the last 3 years.

The following lists the types of document that can be accepted to verify residency for the date(s) where the applicant does not appear on the voters roll search. The document must show the applicant’s name, address and date:

  • Bank, Building Society or Credit Union Statement
  • Council Tax Bill / Statement / Demand
  • Utility Bill/ Statemen t/ Demand for Gas, Electricity, Water only – Not Phone bills, or TV Licences. Not Final Bills
  • Inland Revenue Correspondence – Not P45 or P60

Certified documents need to be endorsed in accordance with the following procedure:

  • Photocopy the document
  • Write on photocopy “Certified Copy of the Original”
  • Sign the photocopy and print underneath your signature: name/company/firm (or company stamp), the date
  • An electronic signature is not acceptable

Persons able to certify:

  • FCA regulated broker
  • Accountant
  • Bank/Building Society official
  • Solicitor
Ex-Pats

The Society will provide Ex-Pat mortgages on the following basis:

  • Foreign Currency – Income (where some or all of the borrower’s income is denominated in a foreign currency, regardless of where their day to day work activities occur)
  • Foreign Currency – Repayment Strategy (where the borrower will repay part or all of a mortgage which is partially or wholly conducted on an Interest Only basis, utilising monies or other assets which are denominated in a foreign currency e.g. the sale of a foreign holiday home)

General

  • The maximum loan to value is 75% for residential and 70% for Buy-to-Let

Applicant Details

  • Applicants must be UK citizens who are temporarily resident abroad
  • For residential properties, it must be the customer’s intention to return back to the UK with this property being their main residence and / or their immediate family must reside in the property
  • Lending can only be secured upon property in England and Wales. The applicant must own one existing property in the UK at which we can trace them (this can be either their residential property or a BTL property)
  • Mortgage payments must be paid via direct debit from a UK bank account

Affordability

Income will be assessed on the following basis:

  • If an applicant is paid in foreign currency, the exchange rate that will be applied is that at lowest point over the last two years from the date of assessment
  • The Society places no restrictions on the foreign currency being utilised, so long as the currency does not fall within any territories subject to financial sanctions or FATF counter measures
  • The Society can accept income from one foreign currency plus income derived in GBP.

Additional Requirements

We would also expect the customer to provide:

  • 3 months of bank statements for any non-UK account held that is deemed to their main account, e.g. the customers have main UK account, but also get paid into a foreign account and manage foreign commitments whilst abroad
  • Clarification of the customer commitments whilst abroad, e.g. regular expenses or credit commitments that are not cover by the applicant's employers

All supporting documents must be translated (where deemed necessary) by the applicant before submission

General

An applicant must be:

  • a citizen of the UK or
  • a national of the European Economic Area and a signatory FATF member or
  • a national of a non-European Economic Area who has been granted indefinite leave to live and work in the UK evidenced by a stamp in a currently valid passport or written confirmation from the Home Office, and
  • liable for UK income tax (unless an Ex-Pat applicant)

Applicants will normally be expected to have been resident in the UK for at least three years immediately preceding the date of their mortgage application. Different requirements apply for mortgages for Ex-Patriates.

Where an applicant cannot demonstrate occupancy in the UK for the preceding 3 years, the Society will consider proceeding subject to:

  • a documented rationale
  • evidence of current proof of address and
  • evidence of their address abroad

The Society does not lend to:

  • Undischarged bankrupts or applicants who have had an IVA (or Debt Management Plan, debt management companies are not considered to be a DMP, adverse criteria should be followed in this instance) within the last 3 years
  • applicants who have received a formal police caution in the last 5 years, ever been convicted of, or have prosecutions pending, for any offence other than parking or speeding, excluding any which are ‘spent’ under the Rehabilitation of Offenders Act; (If any conviction has been spent under the Rehabilitation of Offenders Act 1974, this does not need to be declared)
  • applicants subject to diplomatic immunity from the UK legal system
Guarantors

Guarantors may be offered to provide support to an application where there is a current shortfall in the borrowing capacity of the applicant.

The maximum LTV is 75%

Guarantors must:

  • Be resident in the UK
  • Have income to support the total loan in full, whilst taking into affordability any existing financial commitments of their own and passing the Society’s affordability test
  • Be given independent legal advice / separate representation to ensure they are fully aware of their responsibilities as a guarantor. Where a guarantor does not require legal advice, they must confirm that fact in writing to the Society
  • For any additional borrowing (or any other change), the guarantor must be a guarantor to the main account and agree to the additional borrowing
  • Be prepared to cover outstanding mortgage payments on request

There are no restrictions on the type of lending that guarantors would be acceptable on, however each case will be based on individual assessment.

Joint Mortgage, Sole Proprietor

The Society will consider joint applications where only a sole proprietor is registered at the Land Registry. The expenditure in relation to the non-resident applicant’s residential property will be included within the affordability assessment.

For loans exceeding 80% Loan to Value, approval from the Mortgage Indemnity insurer will be required.

Lending In and Into Retirement

Lending In and Into Retirement is permitted.

LTV’s for Into Retirement lending are capped at 75%, and for In Retirement they are capped at 70%

  • When assessing affordability on the expected, future retirement income, the review should reflect awareness, where feasible, of any changes that may impact the applicant’s lifestyle and/or future financial position
  • Evidencing of pension income – whether state and/or private
  • Any potential to draw-down/lump sum payments on initial funds is highlighted, ensuring this is factored into calculations and it is the ongoing monthly pension amounts that are included.  Where this is not yet known, lowest monthly income is assessed, to ensure ‘worst case scenario’ can be covered
  • Pensions payments expected should cover the term of the mortgage required, pension amounts versus expected longevity are reviewed
  • When assessing state pension, net amount is used
  • SIPP pensions will be carefully appraised, ensuring fund value is reviewed
Married/Co-Habiting Applicants/Other Occupiers

The Society will always expect applications to be in joint names when there are 2 or more people occupying the property and who have an economic interest in it.

The Society will not lend to a sole applicant, where the partner has been classified as a non- borrowing occupier simply to avoid the declaration of a poor credit history. When an application is received in a sole name and it is known that there is a partner residing with them, consideration will be given to lending in the sole name provided that a justifiable rationale is received and a clear credit search is obtained on the non-borrowing partner (with their express consent). This could occur in instances of relationship changes.

In these circumstances, in which it could be justified that the applicant and the non-borrowing occupier’s debt is totally unrelated and should not affect the borrower’s covenant to repay and meet their contractual obligation, lending may be appropriate, provided the terms outlined below are fully met:

  • The applicant and the non-borrowing occupier have no joint related credit of any kind
  • A credit search is carried out on the non-borrowing occupier to ensure that there is no adverse credit, payday/short term lending, missed payments etc that would breach the Society’s policy rules
  • The applicant and non-borrowing occupier have not bought or sold a property together before
  • The applicant must be able to demonstrate that the deposit is 100% from savings (providing commitment evidence) or in the cases of re-mortgages has always owned the property as a single borrower (or in cases of transfer of equity, the non – borrowing occupier has never been named). Gifted deposits should not be allowed to support the applicant
  • If Mortgage Indemnity Guarantee is required, all details relating to the non-borrower’s adverse credit/credit history should be fully disclosed
  • The applicant can demonstrate a clean credit history with no unpaid or missed payments and any existing credit is being managed in accordance with their contractual obligation
  • The applicant can demonstrate full affordability in their own right
  • Any borrowing must be for house purchase or pound for pound re-mortgage and not for any debt consolidation of any kind
  • Any such approved cases will be subject to enhanced mandating.

Under no circumstances should the Society lend to an applicant when it could be argued that the property is being transferred to avoid litigation or bankruptcy.

The Society will allow applications in sole names for married, common-law or civil partners in the following circumstances:

  • For Buy-to-Let products
  • If the existing residential mortgage is in a sole name and the new mortgage is to be in the same name
  • If the existing residential mortgage is in joint names but is being re-mortgaged and changed into a Buy-to-Let in a sole name
  • The spouse or partner is acting as a guarantor for the mortgage
  • If there are religious reasons for the sole name application

All persons over 17 who plan to reside in the property must sign an Occupiers Consent form, permitting a mortgage to be taken over the property. It is expected that legal advice will be given in these circumstances.

Minimum/Maximum Age

Minimum Age - 18 years at the time the application is signed.

Maximum Age – No maximum age. The Society does not place restrictions around the permitted age of borrowers at term end, and instead will consider borrowers of any age who meet the underwriter’s assessment of suitability and affordability, taking into account their needs and circumstances.

Minimum period of ownership

The Society will ordinarily expect the applicant(s) to have had a minimum period of ownership of six months prior to a re-mortgage taking place.

Number of Applicants

We will allow up to 4 applicants on a mortgage.

The Society will consider taking an applicant to the mortgage who will not be party to the title to the property. Where this is the case, consideration will be given to requiring that applicant to receive legal advice.

Payday Loans

Payday Loans / Home Credit / Doorstep Loans

Payday / Home credit and doorstep loans lending have become a method by which borrowers obtain credit quickly albeit at significantly higher rates than mainstream providers charge. Where this type of lending has been identified, the underwriter will make a full assessment which will include asking questions as appropriate, with responses detailed as part of the underwriting decision.

In addition, lending to applicants where this type of lending has been a source of credit, the following terms apply:

  • No more than 2 agreements being raised within the last three years
  • No new loans taken in the last 6 months
  • All loans to have been settled
  • Loan should be satisfied through repayment rather than rolled over into a new Payday loan
  • Where this type of lending has been identified a suitable explanation will need to be requested

Application will be subject to enhanced mandating.

Build types
New Build/Newly Converted Properties

A ‘new build’ is a property that was first registered two years ago or less, following construction, conversion (excluding flats in buildings built prior to 2000) or material refurbishment. For materially converted properties, it will be for the valuer to determine whether the extent of refurbishment is sufficient to make the property fall into the new build category of valuation.

Maximum LTVs for New Builds:

  • For houses: 90% for purchase and re-mortgage
  • For flats / apartments: 80% irrespective of whether purchase or re-mortgage
  • Where there is an element of capital raising to the application (for re-mortgages), the maximum LTV will be capped at 75% (irrespective of whether the security is a house or a flat / apartment)

Note: the maximum LTV is based upon the purchase price minus any incentives (such as free white goods).

Self Build and Custom Build

The Society will consider lending to customers requiring self-build mortgage facilities, subject to the following criteria:

  • No roll up of interest is allowed. Borrowers must make monthly payments on instalments as they are advanced
  • Max 75% LTV of completed valuation
  • 80% LTV of land valuation
  • If the borrower is a not a tradesperson themselves or is a tradesperson and does not have a project supervisor, we will require a professional project manager e.g. tradesmen including plumbers, builders, electricians, etc. We will accept cases where the borrower is a tradesperson and does have a project supervisor without a professional project manager
  • Interest only is permitted during the duration of the build only and must be switched to capital and interest on final release of funds. However, affordability will be assessed on a capital and interest basis
  • Detailed costings for the project are required and a contingency of 20% of total project cost is added on to take account of inflation and unforeseen circumstances. We will consider a minimum of 15% where a fixed priced contract is being used, subject to enhanced mandating between 15% and 19.99%
  • If living in their own home whilst building the property, 12 months committed expenditure e.g. rent or mortgage payments are taken into account with expenditure when reviewing affordability. The client may pay for example up to 12 months’ rent in advance, to enable the rental expenditure to be excluded from the Income and Expenditure assessment. Proof of this arrangement must be evidenced on application
  • A firm timetable for construction of the property is required. Building work must start within 6 months of first draw down of funds and property must be completed 24 months from first draw down of funds
  • Outline planning consent for the type of property the applicant intends to build with at least two years’ consent remaining is required. Where detailed planning is obtained we will require detailed architects’ plans and specifications for the property
  • If the property is built before the ERC period has expired, the customer will be offered either a loyalty or the retention product range. The ERC’s will be waived in the following instances:

    • If another product is taken out with the Society. The completion certificate will need to be supplied at this stage

    • The customer has transferred to a retention product with the Society and they have plans to sell their existing property once moved to the completed self-build. We will waive the overpayment charge and ERC on the sale value of the existing property only

The following stage releases apply, however a flexible approach can be exercised for each case:

Percentage of Advance to be released

Stage

Phase

Max % of current value for funds release

1

Land purchase

80%

2

Initial project costs and laying foundations

80%

3

Construction to wall plate level

80%

4

Building made wind and watertight

80%

5

First fix and plastering

75%

6

Second fix through to certified completion including landscaping

75%

 

Note with regard to stage 1, where the applicant already owns the land, 50% of the value of the land, up to a maximum of 80% of the total loan amount, may be released up front (see examples below).

Example 1:  Total loan amount required is £100,000 and land value is £50,000.  Therefore the full 50% of the land value can be released up front (£25,000) as this only represents 25% of the total loan amount.

Example 2: Total loan amount required is £25,000 and land value is £50,000.  Therefore, as 80% of the total loan amount only equates to £20,000, this would be the maximum that could be released up front (even though 50% of the land value would be £25,000).

  • Up to stage 4, the maximum loan amount released will be 80% of the current value at each stage. At stages 5 and 6, we will release the remaining funds up to a maximum of 75% of the current value at each stage. The amount of funds released at each stage will be subject to valuer’s comments
  • The Society reserves the right to carry out interim valuations during any stage of the build. A re-inspection will be required at each stage prior to funds being released to the customer.
  • The fee for this service will be payable by the customer and can be found in the List of Charges document
  • Knock-down rebuild remortgage – Customers must be able to reduce the mortgage based on the low value point i.e. LTV at land value plus planning permission (first stage)
  • Expat applications will be considered and normal expat criteria will apply. In addition to this we will require:

    • Confirmation of who will be managing the build and

    • When the expat customer plans on returning during the build

  • Gifted deposits will be accepted. Funds from family members to assist with initial cash flow costs, that are agreed to be re-paid, will also be accepted however this will need to be included in the schedule of costs. It would also need to be incorporated into the last release of funds
  • Ten years structural warranty is required. List of main providers are held on the UK Finance Handbook. Other providers may be considered subject to checks of the UK Finance handbook
  • Site insurance and a copy of the insurance schedule will be required with a minimum of the following included:
    • £5 million public liability

    • £10 million employers’ liability

    • Contract works (for the re-instatement value)

    • Dudley Building Society to be noted as mortgagee

  • Site insurance will be accepted from a set list of providers. Other providers may be considered subject to checks of the UK Finance handbook

  • Before building commences the valuer must have sight of the detailed planning and building regulations approvals. A Builders Notice will not be acceptable

  • The building work must be supervised by a suitably qualified Architect. All Architects supervising the build must have Professional Indemnity cover of no less than £1m and one of the qualifications below:

    • ARB UK Architects Registration Board UK (previously known as ARC)

    • *RIBA / ARIBA / FRIBA Chartered Member/Associate/Fellow of the Royal Institute of British Architects

    • MCIAT Corporate Member of the Chartered Institute of Architectural Technicians

    • MASI/FASI Corporate Member/Fellow Member of the Architects and Surveyors Institute (excludes AMSI)

    • C. Build E MCABE/ C. Build E FCABE Chartered Member/Chartered Fellow of the Chartered Association of Building Engineers (excludes A B Eng)

    • MICE/ FICE Member/Fellow of the Chartered Institute of Civil Engineers (Excludes AMICE)

    • FCIOB/MCIOB Fellow or Member of the Chartered Institute of Building

    • MRICS / FRICS Member or Fellow of the Royal Institution of Chartered Surveyors (RICS)

    • MI Struct Eng/ FI Struct Eng Chartered Member or Fellow of Institute of Structural Engineers

*only acceptable if also registered with the Architect’s Registration Board (ARB).

Advanced Stage Releases:

Typically, stage releases will be released in arrears of work being complete. Stage releases in advance of work being complete can be considered subject to the following criteria being met:

  • The Society has a product available for advanced stage releases

  • The Society is able to take a charge on a second property, The Society is able to take a charge on a second property, the property must have sufficient equity to cover 50% of the requested loan amount (including the contingency fund)

  • A valuer shall be instructed prior to each stage being released to ensure progress is being made and the end value is still on target

  • Final maximum LTV of 75%

  • The following stage releases apply

Maximum Percentage of Advance to be released

Stage

Phase

 

1

Land purchase

80% of Land Value

2

Initial project costs and laying foundations

20% of build costs capped at £150,000

3

Construction to wall plate level

20% of build costs

capped at £150,000

4

Building made wind and watertight

20% of build costs capped at £150,000

 

All advances stage payment applications will be subject to enhanced mandating.

Please note that Advance Stage Release applications are subject to product availability and restrictions may apply.

Eco-Self Build

The Society will allow Eco Self-Build properties. An Eco Self-Build can be defined as a property which is anticipated to have an EPC rating of A or B and at least one eco feature. Eco features could include:

  • Higher than normal levels of thermal insulation

  • Better than normal airtightness

  • Good levels of daylight

  • Passive solar orientation — glazing oriented south for light and heat

  • Thermal mass to absorb that solar heat

  • Minimum north-facing glazing — to reduce heat loss

  • Mechanical ventilation with heat recovery (MVHR) system

  • Heating from renewable resources (such as solar, heat pump or biomass)

  • Photovoltaic panels, small wind turbine or electricity from a ‘green’ supplier

  • Natural materials — avoidance of PVCu and other plastics

  • Rainwater harvesting

  • Greywater collection

  • Composting toilet

  • Glass that has two or three layers with a vacuum in between to prevent heat loss; (double or triple-glazed windows)

  • Solar panels or wind turbines

  • Geothermal heating and growing plants on the roof to regulate temperature, quieten the house, and to produce oxygen

Eco-Self Builds will be subject to valuer comments.

Business Use

The following uses are acceptable:

  • Office/Study: Applications where one room is being used on an informal basis as an office/study are acceptable. Any other arrangements must be referred to a mortgage underwriter.
  • Child Minding: Acceptable on a small scale provided that the property is also declared to be the full-time home of the applicant(s).
Property with an Annexe

Applications will be considered in the following situations:

  • Where the annexe is used by a dependent relative or au pair
  • Where the annexe is vacant
  • If the annexe is let commercially, letting must be through a valid commercial letting agreement
  • If the annexe is larger than the owner-occupied part of the building, the application will only be considered on Buy-to-Let terms
Buy-to-Let
Buy-to-Let Definition

According to the FCA Handbook, a Buy-to-Let (BTL) credit agreement means either:

  1. A contract that at the time it is entered into has the following characteristics:
    1. A lender provides credit to an individual or borrower
    2. The contract provides for the obligation of the borrower to repay to be secured by a mortgage on land in the EEA
    3. At least 40% of that land is used, or is intended to be used, as or in connection with a dwelling (or, where trustees are the borrower, by an individual who is a beneficiary of the trust or by a related person)
    4. Provides that the land secured by the mortgage is subject to the requirements in (2);

or

  1. Is an MCD article 3(1)(b) credit agreement which provides that the land, or existing or projected building, to which it relates is subject to the requirements:
    1. Cannot at any time be occupied as a dwelling by the borrower or by a related person and
    2. Is to be occupied as a dwelling on the basis of a rental agreement

Following MCD changes, BTL can either be deemed as a Consumer Buy-to-Let (CBTL) or a professional BTL, with the key determining factor being whether the customer has ever lived in the property, is living in the property or plans to live in the property.

BTL products are non-regulated and are therefore subject to different product terms and affordability.

Please note that Buy-to-Let applications are subject to product availability and restrictions may apply.

General
  • BTL lending is subject to specific BTL products and terms
  • New applications for CBTL borrowing will go through the same underwriting and affordability tests as with a residential mortgage
  • The assessment for the rental income calculation (or Interest Coverage Ratio ‐ ICR) will be determined by the following;
    • For new applicants, where their income puts them into the higher rate tax bracket, the amount earned in rental income must cover at least 140% of the interest only mortgage payment
    • For new applicants, where their income puts them into the basic rate tax bracket, the amount earned in rental income must cover at least 125% of the interest only mortgage payment
    • For re‐mortgage customers, where there is no additional lending (regardless of whether their current mortgage is held with the Society or not), the rental income must cover at least 130%
  • Maximum LTV is 70%
  • Maximum mortgage term available 40 years
  • Buy-to-Let mortgages can be considered on a repayment basis, interest only or part repayment / part interest only
  • We will not accept an application from a portfolio landlord
    • Definition: A portfolio landlord is a landlord with four or more mortgaged Buy-to- Let properties across all lenders. This figure would also include the proposed mortgage being applied for with the Society
Applicant Details
  • Applicant(s) should ordinarily be existing owner occupiers (with or without a mortgage). Consideration will be given where an applicant does not own their own home, subject to the underwriter being satisfied with the underlying rationale
  • Special Purpose Vehicle Companies are not allowed
  • If the applicant(s) have other investment properties, the applicant(s) must complete the Society’s Personal Asset and Liability Statement
  • Borrowers are restricted to a maximum portfolio with the Society of £1 million including main residence
  • Borrowers who are married, in a civil partnership, co-habiting or have their financial affairs linked will have their borrowings with the Society classed as one total figure
Property

The property must be let by way of Assured Shorthold Tenancy agreement. The maximum duration on the term of the tenancy is 36 months and the AST should be renewable at 12-monthly intervals. We will accept a maximum of 4 individuals (regardless of the relationship to each other) on the agreement and a maximum of 4 separate agreements for any one property (where individual rooms are let out).

The property must be:

  • valued at more than £75,000
  • located in England or Wales

We will not lend on the following properties:

  • Properties not in a let-able condition at time of completion
  • Properties converted into bed sits with shared kitchen and bathroom facilities
  • No element of HMO (Housing in Multiple Occupation)
Affordability for Buy-to-Let

For professional BTL applications (not CBTL), the rental income calculation is used to determine affordability. The amount earned in rental income must cover at least 140% of the Interest Only mortgage payment, calculated in accordance with the following:

  • For fixed rate products of 5 or more years duration – 5.5%
  • For all other products - the higher of pay-rate plus 2% or 5.5%

Where the rental cover calculations are not met, the Society will consider lending where it can be adequately demonstrated that the strength of borrowers’ covenant is sufficient to create an acceptable lending risk. In order to demonstrate this, the following criteria will be met:

  • The BTL mortgage must fall within multiples of 4.75 (income) for a sole application and 4.5 for a joint application, with the annualised payment for the background residential mortgage having first been deducted from gross income and
  • The applicants must provide a budget planner and by using either this or ONS data, it must be clear that affordability exists for the background residential mortgage
  • The Society will accept as income the net rental figure from existing BTLs, provided that this can be evidenced for at least the previous 12 months. Evidence will be required in the form of SA302s or company accounts
  • The Society will carry out an assessment of the customer’s ability to cover rental voids, to ensure the customer can not only cover the void but also cover the required expenses associated with owning and maintaining a rental property.
Multi–Tenanted Properties

Properties let on a multi-tenanted basis are acceptable, provided that:

  • the property is occupied by no more than 4 tenants
  • the property is not subject to Houses in Multiple Occupation licensing
  • the property contains no more than four habitable storeys and no more than one kitchen
Deposit
Proof of Deposit

We will require evidence of the deposit such as bank account or investment statements. In the case of a gifted deposit we will require sight of a letter from the donor stating that there are no conditions attaching to the gift.

Source of Deposit

The minimum deposit must be provided from the applicant’s own funds or a gifted deposit. Loans, credit cards, secured loans and other forms of credit are not acceptable as the source of the minimum deposit. The only exception to this is for members of the armed forces, where the deposit is funded via the Long Service Advance of Pay Scheme will be acceptable.

General
Capital Raising

We will accept the following loan purposes for capital raising.

Loan Purpose

Maximum LTV %

Additional borrowing for home improvements including loans for repairs and property maintenance.

Interest only: 75%

Repayment:  90%

Repayment: 80%

Capital raising, consolidation of debt whether or not the property is mortgaged to the Society, another lender or not mortgaged at all.

Interest only: 75%

Repayment:  75%

 

The purchase of another property such as a second property for the applicant’s own occupational use or occupation by a dependent relative (excluding joint application, sole proprietor cases).

Interest only: 75%

Repayment:  80%

 

Capital raising to repay tax bills is acceptable provided a full explanation as to why the tax bill is outstanding and reassurance that there are no further tax liabilities outstanding or likely to accrue. Enhanced mandating will be required.

Interest only: 75%

Repayment: 80%

Capital raising for new business ventures is acceptable providing a full explanation of the venture is received and understood by the Underwriter and the Underwriter is satisfied that this will not impact the income being used from existing employment to satisfy on going affordability.

Repayment: 80%

Casual Employment

We do not accept applications from people employed on a casual basis. We do however accept zero-hours contracts, subject to enhanced mandating.

Child Minding/Fostering

Where an applicant is a child-minder or full-time fosterer they are treated as self-employed.

Where an applicant is a full-time fosterer, any appropriate dependants (including those fostered) should be declared and this, combined with fostering income, will be taken into consideration when reviewing affordability.

Covid-19 Considerations

During the Coronavirus pandemic additional underwriting considerations are required to ensure the Society manages risk between the underwriting assessment and completion. This is necessary as personal circumstances may change quickly in the current economic climate. The following points are required to be considered for all applications:

  • Immediately prior to completion a declaration is to be requested from the submitting intermediary stating that the applicants financial position has not changed.
  • Discretionary income such as bonuses and overtime should be scrutinised prior to being used for affordability. An employment reference will be required to ensure this type of income will continue to be received
  • Self-employed applicants will need to demonstrate that sufficient cashflow is available, this must have been produced through BAU activities as opposed to items such as Business Bounce Back Loans

For 90% LTV products additional underwriting controls are required:

  • The affordability calculator must be a pass, refers will not be accepted
  • The remaining monthly income must equal at least 30% of the stressed monthly payment
  • The security must not be a flat
  • Please note that 90% LTV applications are subject to product availability and restrictions may apply
Credit Commitments

The annualised payments on any continuing commitments including shared ownership rent, maintenance that extend more than 6 months beyond the anticipated date on which the Society’s loan is completed are deducted from the ‘qualifying income’. For the purpose of this calculation, credit card commitments must be based on the lower of 3% of the balance outstanding or the required minimum repayment level specified by the credit provider (if known).

Eco Products

Certain properties will be eligible for the Society’s Eco product range. Residential properties which currently have an EPC rating of A or B or BTL properties with a rating of A-C qualify. A copy of the current EPC certificate should be provided during the underwriting assessment.

Employment

Applicants must be able to demonstrate a continuous track record of employment or self- employment and, currently, must be either:

  • Permanently employed for the preceding 6 months and have been with their present employer for at least three months unless starting a new job with no probationary requirement or
  • Employed on a contract of a minimum 6 months’ duration, or 3 months’ duration if the applicant can prove that they have had regular contracts over the last 2 years in the same line of work or
  • Self-employed - defined as an individual who controls their own business, such as a Sole Trader, Partner or Shareholding Director (holding in excess of 25% of the share capital) of a company. We would normally expect applicant(s) to be self-employed for a minimum of 1 year
  • Casual Employment – We do not accept applications from people employed on a casual basis. We do however accept zero-hours contracts
Existing Mortgage(s) – Buy-to-Let with another Lender

The applicant must complete The Society’s Property Schedule.

 The mortgage debt(s) may be disregarded providing the mortgage is conducted satisfactorily and rental income cover is sufficient, (i.e. the appropriate ICR percentage coverage is met) in accordance with the Society’s assessment process for buy to let applications.

The Society will accept as income the Net rental figure from existing BTLs, provided that this can be evidenced for at least the previous 12 months. Evidence will be required in the form of SA302s or company accounts.

Exposures Levels

Mortgage lending exposure in any one property development is capped, where practicable, to 25%.

Where this is residential Buy-to-Let or Shared Ownership, a maximum of 25% exposure is allowable in blocks of 4 flats or more. For blocks of 3 flats or less, we will only lend on one property.

Minimum and Maximum Loans

Minimum:

There is no minimum loan amount (although at times, some product specific minimum loans may apply)

Maximum:

  • The maximum loan is £1.5 million
  • Loans in excess of £500,000 must be approved by the Credit Committee
  • Loans over 80% must be referred to the mortgage indemnity insurers
Maternity/Paternity

We will accept the income that the applicant expects to receive after maternity / paternity leave. Confirmation in writing from the applicant that they intend to return to work must be obtained.

Unacceptable Income

We will not accept applications where income is derived from incapacity benefits, housing benefit, income support and/or job seeker’s allowance unless they are for HOLD mortgage applications. Applications where income is derived from Universal Credits will not be accepted unless evidence can be provided on how any acceptable benefit is derived, exemptions may be made for HOLD mortgage applications.

Specialist Areas of Lending
  1. Flats (up to 5 Storeys)
    • Flats are acceptable subject to a maximum loan to value of 90% (or 80% if new build)
    • Flats above 5 storeys high are acceptable providing that they were constructed in or after the year 2000 (note: this would include conversions post 2000 where original build was prior to 2000) and are recommended by the valuer as suitable security with satisfactory on-going demand. The maximum LTV is 75%
  2. Studio Flats
    • Studio Flats are acceptable subject to no adverse comments from the Valuer and confirmation from the valuation report that demand for the property is good. Although there is no minimum square footage requirement, where this is below 35m2, the application will be subject to enhanced mandating
Right to Buy

Loans may be accepted up to 100% of the discounted purchase price, provided that they do not exceed the Society’s lending limits based on valuation and subject to the loan to value against the full open market value, not exceeding 80%. Additional borrowing is permitted for home improvements only subject to being no more than 20% of the discounted sum. For funds to be released, we require sight of invoices. The loan must be conducted on a capital and interest basis.

All applicants that wish to be included in the mortgage must show on the right to buy documents.

Please note that Right to Buy applications are subject to product availability and restrictions may apply.

Shared Ownership
  • Maximum mortgage of 90% of the initial share without mortgage indemnity insurance, minimum share 10%, subject to Mortgage Protection Clause
  • The Shared Ownership arrangement must be through a registered Housing Association or Registered Social Landlord
  • The borrower(s) must be able to evidence affordability of both the mortgage and the rent payable on the remaining share; with the rent plus any service charge/maintenance costs being deducted as a commitment
  • Shared Ownership loans are only offered on a capital repayment basis only, interest only is not available
  • If lease does not allow the borrower to staircase to a full 100% of the value of the property the application is not acceptable
  • Additional borrowing on shared ownership properties can be considered for the purchase of additional / final shares and for home improvements
  • Additional borrowing for home improvements up to 85% of current value of the share owned can be considered. Consent from the Housing Association must be obtained in all cases
  • Additional borrowing for non-home improvements, for example, debt consolidation cannot be considered
  • On purchase of the final share, mortgage indemnity insurance is required for any amount then owing above 80%, up to a maximum loan of 90%
  • Please note that Shared Ownership applications are subject to product availability and restrictions may apply
Holiday Let

The full property must be used as a holiday let, therefore properties where individual rooms or sections of the property are let, will not be accepted.

The Society can accept holiday lets on both a purchase and remortgage basis.

Existing BTL assessment rules apply, therefore applications may be assessed on either an ICR or full affordability basis depending on the scenario of the borrower. Borrowers are allowed to use the property for personal use when not rented, the standard BTL condition that denies this should be removed from the offer.

For valuation purposes, the valuer will confirm there is a sustainable market, on the assumption of a 6-12 month AST basis (this is to provide confidence on re-saleability). The valuer will also confirm that there are no onerous restrictions or covenants affecting the usage of the property, e.g. no holiday parks or restricted usage periods.

Properties with Land

Properties which include larger acreage of land are acceptable provided there are no farming activities or planning restrictions. The applicants must undertake not to use the land for any agricultural or business purposes. For re-mortgages there must be no tenancies in place.

Second Home/Holiday Home

If the property is for owner-occupation we will consider applications subject to a maximum loan to value of 80%.

Undervalue Transactions

We will consider applications where the purchase price is below the market value, subject to the relationship between vendor and purchaser being plausible e.g. parent selling to son/daughter. Any charge placed on the property by a vendor must be subordinate to the Society’s.

The equity must be gifted and not subject to any subsequent charge.

Purpose of Loan

Loan Purpose

Maximum Loan %

The purchase of a property or any interest in a property, for owner occupation, including:

 

  • Purchase of the freehold, commonhold or leasehold estate of the property;
  • Purchase of the initial share or additional share under a Shared Ownership Scheme;

Interest only: 75%

Repayment : 90%

Consolidation of an HTB / Shared Equity loan.

Interest only: 75%

Repayment: 90%

The remortgage of property for owner occupation currently charged to another lender.

Interest only: 75%

Repayment: 90%

Additional borrowing for home improvements including loans for repairs and property maintenance.

Interest only: 75%

Repayment: 90%

The purchase of freehold title of a leasehold property.

Interest only: 75%

Repayment: 90%

Capital raising, consolidation of debt is only permitted where the funds used were for the purpose of home improvements and evidence of use can be provided.

 

This is acceptable whether the property is mortgaged to the Society, another lender or not mortgaged at all.

Interest only: 75%

Repayment: 75%

The purchase of another property such as a second property for the applicant’s own occupational use or occupation by a dependent relative.

Interest only: 75%

Repayment: 80%

Purchase of another property for letting, Buy to Let

Interest only:75%

Repayment: 75%

NOTE:

  • A mix of interest only and repayment is allowed only where the total borrowing is less than 75% LTV.
  • Debt consolidation is not permitted unless it can be evidenced that the funds used were for home improvements.
  • For existing borrowers requiring additional borrowing where the existing debt is conducted on an interest only basis and the LTV is more than 75%, the additional borrowing must be arranged on a repayment basis.
  • Lending is restricted to 80% for new build flat/apartment purchase.
  • Product restrictions may also apply.
Solicitors

The Society operates a panel management arrangement via LMS.

All details regarding LMS can be found on the Intermediary section of our website.  Go to: 

  • Tools and Downloads
  • Important Documents
  • Conveyancing section
Valuers

When a Standard Valuation is required it must be independently instructed by the Society. Panel Management is provided by Connells.

The valuation is valid for six months from the date it was carried out. If the valuer confirms valuation remains valid after this period of time it may be used. If confirmation cannot be obtained a new valuation must be instructed.

Application Packaging Requirements

The minimum packaging requirements for all cases:

  • Fully Completed Application Form on DPR*, along with a signed declaration. (If there are more than 2 applicants, please submit a manual form for additional applicants)
  • 3 months of most recent bank statements
  • Fully completed Direct Debit Mandate
  • Two forms of ID for each applicant, one confirming name and one confirming address
  • Latest years P60 & last three consecutive months’ payslips plus possible Employment reference (dependant on LTV)
  • Company Accounts for self-employed (3 years evidence of earnings for self-employed applicants)
  • Valuation fee (including £125 application fee). Please refer to Valuation Fee Scale

*Please ensure that each applicant’s telephone number and e-mail address (if applicable) are keyed into our intermediary portal.

Ad-hoc packaging requirements

  • If applicant has any other properties whatsoever, mortgaged or unencumbered (BTL/resi/holiday home) – completed Property Schedule is required
  • Completed Loan into Retirement Declaration form where term takes applicant over desired retirement age
  • Proof of retirement income is required when applicant is within 10 years of desired retirement age at the time of application
  • Memorandum of Sale of Housing Association for all Shared Ownership cases
  • Right to Buy Notice from Council for all Right to Buy cases
  • Proof of rental payment covering 12 months where applicable. Bank statements are required where Tenancy is not via a Professional
  • Letting Agent or Private Landlord’s reference. A reference alone is acceptable where Tenancy is managed by a Letting Agent
  • Proof of mortgage payments, covering 12 months, where applicable
  • Proof of Deposit
  • Three year’s Proof of Residency if applicant not on Voters Roll
  • LMS declaration form
  • Consent to Mortgage Form is required when there will be any persons residing in the property on completion age 17 or over
  • BTL Supplementary Declaration

All forms/reference templates can be downloaded here.

Insurance

It is a condition of all our mortgages that buildings insurance is taken out for a sum recommended by the Society and must be maintained throughout the lifetime of the mortgage but does not have to be taken out through the Society.

If the Society does not arrange the insurance the conveyancer is instructed to ensure that suitable insurance starts no later than completion.

Income
Qualifying Income for Applicants in PAYE Employment or Working on Contracts

The following income and percentages of income are considered when calculating the amount the Society will lend to PAYE employees or contract workers.

Qualifying income table

Proof of Income
  • For applicants paid monthly – we require the last P60 (or payslip showing aggregate annual income where appropriate) and the most recent payslip(s), to cover at least the latest 3 months’ income. Where deductions are seen on the payslips, ensure this is reflected in the affordability calculator.
  • For applicants paid weekly or bi-weekly - we require the last P60 and sufficient payslips to cover a three month period;
  • If the applicant is self-employed, we normally require the last 3 years’ trading accounts. We also accept SA302's or, Tax Calculations with corresponding Tax Overviews.
  • Reference should be made to accountants and professional advisers for details of likely future income and trading prospects.

Bank Statements:

  • For employed applicants or those retired or with private income, we require the last 3 months’ bank statements which must show salary / income credits where such could be expected to exist;
  • For self-employed applicants, we will require the last 3 months business and personal bank statements. For applicants applying for a mortgage based upon proof of income for a period of less than 2 years, we would ordinarily expect to see business and personal bank statements for a period of 6 months.
  • We will examine the bank statements to ensure that we have an understanding of the applicant’s spending or unusual income patterns.
  • Occasionally, underwriters may seek Credit Card statements to look at expenditure in greater detail.
Property
Acceptable Security

The property must be:

  • Used by the applicant or by an immediate family dependant relative, for owner occupation or
  • Used for occasional or eventual owner occupation or
  • Used for Buy-to-Let
  • Located in England or Wales
  • The subject of a first mortgage by the Society
  • Be freehold, commonhold or long leasehold
  • Have either acceptable New Home Warranty or acceptable Professional Consultant’s Supervision Certificate if new, or built within 10 years
  • Classed as suitable for mortgage purposes by the Society’s valuer
Unacceptable Security

The property must not be:

  • Valued below £75,000
  • A freehold flat, unless a modern coach house or single property with separate titles (see section 19.11.6)
  • A property subject to a flying freehold where this exceeds 25% of the property
  • A Farm / small holding where there is land subject to current agricultural use
  • A flat in a building with more than 5 storeys (if originally built prior to 2000)
  • Flats with deck access are not acceptable, unless access to the deck is controlled and secure and subject to valuer confirmation of suitability
  • A flat above a shop or other business premises where the shop directly below or the one either side of directly below is considered to potentially impact on future saleability (e.g. launderettes; fast food outlets). All others considered subject to enhanced mandating, valuer approval, a maximum loan to value of 75% and detailed underwriting rationale
  • A property with mixed residential and business use (except in agreed circumstances detailed in 19.11.9, point 4)
  • A property with occupancy restrictions (e.g. age, local working or Section 106 restrictions)
  • A HMO requiring a mandatory or discretionary licence or is in an area subject to Article 4 control of C4 use
  • Mobile Homes
  • Landlocked property
  • Houseboats
  • Property with pre-emption clause in existence
  • Park Homes
  • Sheltered Accommodation
  • Live/work units
  • Property with no functional kitchen or bath/shower room
  • Property where material environmental hazards are present
  • Property where saleability may be adversely affected by local planning matters or by an unsatisfactory mining report
  • Property with Planning Use Classes Order other than C3 or C4 (outside of an area subject to Article 4 control of C4 use)
  • Property on which there is a local authority grant outstanding
  • Property which has shared access where the applicant or a relative controls the property or properties which share the access
Repayment Terms and Repayment Methods
Repayment Terms

Loans can be repaid over terms of between 1 and 40 years.

An applicant’s age may need to be taken into account when determining the mortgage term.

Repayment Methods

The Society accepts repayments of loans either on capital and interest (a repayment mortgage) or by payment of interest only or a combination of both.

 LTV Limits

  • Repayment   90%
  • Interest Only  75%
  • Part Interest Only / Part Repayment    85%

For the following types of borrower the repayment method is restricted to repayment (capital & interest) regardless of loan to value:-

  • Right to Buy
  • Shared Ownership
Interest Only

All loans arranged where the capital element is not included in the monthly payment (including those that are part capital and interest repayment, part interest only), must have a suitable strategy in place to repay the capital at the end of the term.

We must see evidence of the repayment strategy for Interest Only mortgages so documents relating to the repayment strategy must be received before a mortgage offer can be considered. The Society’s Interest Only Declaration Form must also be completed prior to offer to enable the Society to assess the repayment strategy.

This requirement does not apply to Buy to Let applications (where ‘sale of property’ is considered to be the default method of repayment).

Please note that Interest Only applications are subject to product availability and restrictions may apply.

Repayment Strategies

The table linked below shows the repayment strategies that we accept and the evidence required in each case. It also shows the methods we use to assess whether a repayment strategy meets our lending criteria.

Repayment Strategies

Periodically, we will ask applicants to confirm in writing that their repayment strategy is on track to repay the outstanding balance. If they are unable to satisfy us that their repayment strategy (ies) remain on track to repay the outstanding balance on their mortgage, we may ask them to transfer some or all of their mortgage onto a capital and interest repayment basis.

  • Repayment strategies CANNOT be accepted if they include the name of anyone NOT named on the mortgage
  • Applicant(s) can use more than one repayment strategy to cover their total interest only amount
  • The on-going cost of any repayment strategy must be included in our affordability calculations

The following are NOT acceptable repayment strategies:

  • Inheritance (unless the person has already died and the exact entitlement is known and can be adequately evidenced)
  • Speculative and uncertain strategies (such as setting up a new business which does not exist at the time of application; gambling)
  • Reliance on future growth in property values (either for the main security or for other background properties)
  • Utilisation of an investment plan where there does not already exist an established track- record of investment
  • Anticipated gifts of either monies or assets 
  • Future lump sum repayments
Self-Employed
Self-Employed Definition

A self-employed applicant may be a sole trader, a partner in a business or a Director who owns more than 25% of a company.

Self-Employed Income – Assessment of Income

The Society will use the income shown in the Accounts or Accountant’s letter.

If profit has increased by more than 25% in the last 12 months an average of the last 3 years’ net profits will ordinarily be used. It will be permissible to use the latest figures where there has been more than a 25% rise if a satisfactory explanation can be given and the Underwriter is satisfied that the increase is sustainable.

For a Director who owns more than 25% of a limited company, we will use the remuneration for the Director plus their share of regular dividends based on an examination of dividends paid in the last 3 years.

Please note we accept SA302's or, Tax Calculations with corresponding Tax Overviews as proof of income.

Applicants with less than one full year’s trading history

The Society will expect a self-employed applicant to have been self-employed for at least a year, and to be able to provide accounts for the first year’s trading together with a projection for the current year from their accountant.

Self-Employed Contractor Applicants

A sub-contractor will typically be:

  • A sole trader
  • Operating with one client at a time
  • Undertaking work of a nature consistent with previous employment

Income may be calculated daily, weekly or monthly. Where a day rate is available, the Society will annualise income based upon an assumed 48 week working year. A 5-day working week is usual unless proof is received to the contrary.

The applicant must be able to demonstrate industry experience and where the contract is less than 12 months old the Society will use an average of the contract income and the earned income from the most recent P60, to arrive at a 12 month figure.

Accountants Qualifications

Accounts or Accountant's letters must be prepared and signed by a professionally qualified Associate or Fellow of one of the following bodies:

  • The Institute of Chartered Accountants (ACA/FCA)
  • The Association of Certified Accountants (ACCA/FCCA)
  • The Chartered Institute of Management Accountants (CIMA)
  • The Chartered Institute of Public Finance Accountancy (CIPFA)
  • The Chartered Institute of Taxation (CIOT)

If the accountant is not so qualified, the accounts must be supported by the corresponding years’ Tax Returns and tax assessments/self-assessments issued by the HM Revenue & Customs. Normally we would expect the Accountant to have acted for the borrower for a minimum of 2 years.

The end of the latest financial year/tax period covered must be no older than 18 months.

Valuations and Retentions
Valuations

Properties Subject to Special CIrcumstances

There are properties that may be subject to special circumstances.  In all cases, as with construction type, the following should be considered:

  • Future saleability of the property
  • Future re-mortgageabilty of the property
  • The insurability of the property

Specific points should be noted in relation to the following property types.  If there is any doubt about the security, clarification should be sought from the valuer.

1. Flats (up to 5 Storeys)

Flats are acceptable subject to a maximum loan to value of 90% (or 80% if new build). 

Flats in buildings above 5 storeys high are acceptable provided that they were constructed in or after the year 2000 (note: this would include conversions post 2000 where original build was prior to 2000) and are recommended by the valuer as suitable security with satisfactory on-going demand.  The maximum LTV is 75%.

2. Studio Flats

Studio Flats are acceptable subject to no adverse comments from the Valuer and confirmation from the valuation report that demand for the property is good.  Although there is no minimum square footage requirement, where this is below 35m2, the application will be subject to enhanced mandating.

Where the internal square footage is less than 35m2, specific guidance should be provided from the valuer as to the future saleability of the property.

3. New Build

The DBS definition of a ‘new build’ is a property that was first registered two years ago or less, following construction, conversion (excluding flats in buildings built prior to 2000) or material refurbishment.   To understand whether the level of refurbishment is ‘material’, valuer comments on property alterations should be considered.

For the purposes of new build warranties, any property built or converted in the last 10 years requires a new build warranty, e.g. NHBC guarantee or warranties from the professional parties involved in constructing the property e.g. architect’s warranties.  Details of warranty providers accepted by DBS are held in the UK Finance Handbook.

Maximum LTVs for New Builds:

  • For houses: 90% for purchase and re-mortgage
  • For flats / apartments: 80% irrespective of whether purchase or re-mortgage
  • Where there is an element of capital raising to the application (for re-mortgages), which includes debt consolidation, the maximum LTV will be capped at 75% (irrespective of whether the security is a house or a flat / apartment)

Note: the maximum LTV is based upon the purchase price minus any incentives (such as free white goods).

4. Business Use

The following uses are acceptable (all subject to regulatory requirements of at least 40% of that land being used, or is intended to be used, as or in connection with a dwelling):

  • Office / Study - Applications where one room is being used on an informal basis as an office / study are acceptable.  Any other arrangements must be referred to an underwriter
  • Child Minding - Acceptable on a small scale provided that the property is also declared to be the full-time home of the applicant(s)
  • Annex - Applications will be considered in the following situations:
  • Where the annex is used by a relative or au pair
  • Where the annex is vacant
  • If the annex is let commercially, this must be through a valid commercial letting agreement
  • If the annex is larger than the owner-occupied part of the building, the application will only be considered on Buy to Let terms 

5. Properties with Land

Properties which include larger acreage of land are acceptable provided there are no farming activities or planning restrictions.  It is a mortgage condition that the applicant(s) must undertake not to use the land for any agricultural or business purposes.  For re-mortgages care should be taken to check any existing tenancies and the Valuer should be asked to comment about the impact on the valuation of the property.

6. Undervalue Transactions

We will consider applications where the purchase price is below the market value, subject to the relationship between vendor and purchaser being plausible e.g. parent selling to child.

The equity must be gifted and not subject to any subsequent charge.

7. Retention and Final Inspection

Following an inspection by the valuer a recommendation may be made for works to be undertaken.  Prior to the receipt of specialist reports or confirmation that works have been completed, a retention may be recommended.

Where the retention is low in comparison to the advance and we have sufficient equity based on the current valuation we may waive a retention in accordance with the table below:

 

Valuation of Property

Retention to be Waived

Max LTV

Less than £100,000

Up to £2,000

80%

Greater than £100,000

Up to £4,000

80%

 

Where the LTV is above 80%, the retention will be made and an inspection is required prior to release, for which a charge will be made.

Where this specifically relates to self-build, please refer instead to section 22.6.

8. Final Inspection – New Build

The Society will not normally carry out final inspections on new builds but will rely on the conveyancer providing confirmation that the property has been fully completed following receipt of certificate to that effect from the warranty provider.  The exception to this rule is where the valuer has provided the original valuation from plans / site visit only or the valuer has made it clear a final inspection is definitely required for another reason.

9. Valuation of properties in multi-storey, multi-occupancy residential buildings with cladding

Requesting an EWS1 for buildings where there is no visible cladding or a low risk of remediation work creates long and unnecessary delays to the buying, selling or re-mortgaging of such properties. It also prevents the limited pool of competent experts from focussing their assessments on properties where there is a significant risk to the safety of occupants. A valuer should always have a rationale to justify the request for an EWS1 form. It does not apply to individual terraced, semi-detached or detached houses, bungalows or developments considered to be non-domestic.

Where a valuer or lender has been able to establish (within the limits of their competence) that the building owner has met the advice in the consolidated advice note, or that a building over 18 metres has a valid building control certificate in accordance with The Building (Amendment) Regulations 2018 (or the equivalent in the devolved nations as applicable), an EWS1 form should not be required. Where there is a route to remediation (for example through a warranty from the freeholder to cover the costs of remediation or from government grant funding), the valuer may take that into account in their valuation.

For buildings over six storeys, an EWS1 form should be required where:

  • There is cladding or curtain wall glazing on the building or
  • there are balconies which stack vertically above each other and either both the balustrades and decking are constructed with combustible materials (e.g. timber) or the decking is constructed with combustible materials and the balconies are directly linked by combustible material.

For buildings of five or six storeys, an EWS1 form should be required where:

  • There is a significant amount of cladding on the building (for the purpose of this guidance, approximately one quarter of the whole elevation estimated from what is visible standing at ground level is a significant amount) or
  • There are ACM, MCM or HPL panels on the building* or
  • There are balconies which stack vertically above each other and either both the balustrades and decking are constructed with combustible materials (e.g. timber), or the decking is constructed with combustible materials and the balconies are directly linked by combustible materials.

For buildings of four storeys or fewer, an EWS1 form should be required where:

  • There are ACM, MCM or HPL panels on the building*

* Note: metal cladding and ACM/MCM are visually very similar, so if metal panel cladding is present, the valuer should confirm with the building owner or managing agent in writing that they are not ACM/MCM, or, if confirmation cannot be obtained, an EWS1 inspection should be requested.

Retentions

Following an inspection by the valuer a recommendation may be made for works to be undertaken. Prior to the receipt of specialist reports or confirmation that works have been done, a retention may be recommended.

Final Inspection – New Build

The Society will not normally carry out final inspections on new builds but will rely on the conveyancer providing confirmation that the property has been fully completed following receipt of certificate to that effect from the warranty provider. The exception to this rule is where the valuer has provided the original valuation from plans/site visit only or the valuer has made it clear a final inspection is definitely required for some other reason.

Valuation Fee Scale

Valuation

Fee*

< £100k

£285

< £150k

£315

< £200k

£365

< £250k

£395

< £300k

£425

< £350k

£455

< £400k

£485

 

 

 

 

 

 

 

 

 

 

  • For every £50,000 or part thereof the scale is increased by £30
  • Includes £125 application fee
  • Combined Mortgage valuation & Homebuyers report fees available on request – fee confirmed upon enquiry
  • Re-Inspection Fee - £80
Traditional Construction

The following are regarded as traditional construction and normal lending terms apply:

Walls:

  • Cavity outer walls of brick/reconstituted stone with inner walls of brick or block
  • Cavity outer walls of brick/reconstituted stone/blocks rendered with inner walls of brick or block. Timber framed property with outer walls of brick/reconstituted stone built 1970 or after
  • Timber framed property with rendered outer walls of brick/reconstituted stone/block built 1970 or after
  • Solid stone

Roof:

  • Tile (concrete)
  • Slate
  • Thatch (reed or straw)
  • Felt, asphalt
  • Copper, lead
Construction Methods

Property acceptability is based on a satisfactory valuation report, in accordance with the construction and valuation information detailed below. Non-standard construction will be assessed on individual merit.

As a general rule if the construction type would be considered readily saleable, insurable and mortgageable, it is likely to be acceptable.

Walls

Construction Type

Acceptable?

Solid Wall Construction

Yes

Cavity Wall Construction

Yes

Wall Type

 

Brick

Yes

Natural Stone

Yes

Reconstituted Stone

Yes

Concrete Block

Yes

Craft earth techniques (e.g.Cob) and Flint

Yes

Concrete - Wimpey no Fines

Yes

Concrete – Laing Easiform, where post 1945 (Type II)

Yes

Pre-Cast Reinforced Concrete (PRC) houses where the property has been repaired under the PRC (Homes) Ltd repair scheme. Only where all other properties in the same structural block (i.e. other semi or rest of terrace) have been repaired to the same standard.

Yes

Large Panel Systems (LPS), no more than two storeys

high and subject to structural engineer’s report

No

Steel Framed Houses, (subject to being readily

mortgageable and saleable). Only where retrospective cavity insulation has not been installed.

Refer

Timber framed houses, (clad with masonry). Only

where retrospective cavity insulation has not been installed.

Yes

Period (pre-1900) timber framed houses, subject to

valuer confirming saleability

Yes

Timber Framed – Inner and Outer Leaf

No

Any property where there is ongoing movement and

monitoring is required.

No

Mundic properties where the property is not graded A

1,2 or 3 following a Petrographic Test

No

Property where high alumina cement or Mundic block

has been used in the construction

No

Prefabricated building and PRC construction

No

Property which has been underpinned

Refer

Property suffering from progressive structural

movement

No

Steel/concrete frame flats with suitable cladding

Yes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Where ‘Refer’, care should be taken to review valuer comments. If the application is in relation to a wealth planning product, specific consideration will be needed when reviewing ‘referred’ construction types.

Roof

Timber frame covered with either tiles or slates

Yes

Reed or Straw

Yes

Copper

Yes

Lead

Yes

Zinc

Yes

Asphalt (Maximum 50% for houses)

Yes

Mineralized Felt (Maximum 50% for houses)

Yes

GRP & EDPM

Yes

 

 

 

 

 

 

 

 

 

 

Flat Roofs

Flat roofs clad with copper, lead, zinc or asphalt are considered acceptable as are other modern materials which carry a minimum 25-year guarantee (subject to guidance above). Mineral felt flat roofs tend to have a shorter lifespan and are acceptable for dormers and extensions but not where they form more than 50% of the total roof area of the property.

Minimum Lease Term (for Leasehold Property)

For leasehold properties where the mortgage will be conducted on a Capital and Interest Repayment basis, we will expect the lease term remaining to be at least 85 years at draw down.

For leasehold properties where the mortgage will be conducted on an interest only basis (or part and part) and the LTV is < 50% at draw down, we will expect the lease term remaining to be at least 85 years at draw down.

For Interest Only/part and part mortgages where the LTV at draw down is >50%, we will ordinarily expect there to be at least 85 years remaining at the end of the mortgage term.

General Information
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Contact our Intermediary Team with any case queries you may have.

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