Lending Criteria

THIS PAGE IS FOR USE BY AUTHORISED INTERMEDIARIES ONLY

 

Adviser Guide

 

1.

Lending Area

2.

Residential Loan Criteria

3.

Interest-Only

4.

Affordability

5.

Family Assistance

6.

Employed Applicants

7.

Self-Employed Applicants

8.

Lending into Retirement

9.

Retirement Interest-Only

10.

Other Income Treatment

11.

Credit History

12.

Property

13.

Self-Build

14.

Documentation

15.

Buy to Let

16.

Buy for Uni

17.

Solicitors

 

Lending Area

 

Property to be used as security must be in England or Wales

 

 

Residential Loan Criteria

 

Minimum purchase price
£125,000
Minimum loan
£25,000
Maximum term

35 years (Capital & Interest)

25 years (Interest-Only)

Minimum term
5 years 
Max age at term end 

No Max age subject to LTV & Term

Unless IO sale of property
Maximum Applicants 
Up to 4
Maximum loan amounts
<80% LTV £1.5m 
80-85% £400k
85-90% £350k
90-95% £300k 
Capital raising 
Accepted 
Debt consolidation 
Accepted 

 

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Interest-Only

 

Max LTV Interest Only

 

Residential
60%
BTL

75%

RIO mortgage
50%
Part I/O & Part C&R
80% (I/O Max 50% of total <=60% LTV no Min)
Acceptable repayment vehicles 
  • Regular savings plan (current value must be at least 50% of the loan amount)
  • Sale of assets (sterling only) – subject to current value at least equal to the loan amount
  • Periodic capital repayments - subject to minimum 2 years’ history of bonus/dividend payments
  • Sale of mortgaged property (where property valued at minimum £350k and there is a plausible downsize plan)

 

The Society will review any proposed repayment plan for plausibility

 

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Affordability

 

Our affordability calculator must be completed and submitted with the DIP / application. Available on our website.

Expenditure that would be difficult to reduce in times of stress should be used in the calculation.

 

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Family Assistance

 

Gifted Deposit
Accepted
Guarantor Mortgages

Accepted – affordability assessment must show the borrower can meet at least 70% of the repayment.

 

The affordability assessment must show that the Guarantor is able to afford the full amount of the loan.  Account taken of term/age as well as status of Guarantor.

 

Minimum Age 25, Maximum Age <86 at the end of the Mortgage Term.

 

(Not available in use with the Buy for Uni Mortgage)

Joint family borrower / Sole ownership

Permitted, where the proposed Joint Non-Owning Borrower is a close family member.

 

Max age 75

 

Split Term Available

 

Affordability assessment must show the younger borrower can meet at least 50% of the mortgage payment.

 

Plausible explanation as to how the youngest borrower will be able to take over the mortgage in the next 5-10 years

 

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Employed Applicants

 

Minimum employment period 

3 months with current employer (Can consider less. Discuss with the Intermediary Team)

 

12 months continuous employment

Probation period 
Can process loan but will not complete until employer confirms completion of probation period. 
Income treatment:
% used in affordability calculator
Salary
100% net income
Guaranteed regular income
100%
Car allowance
100% (3 Months History)
Large Town Allowance
50% (100% 12 Months History)
Guaranteed shift allowance
100%
Zero hours contracts
100% (min 12 months history)
Agency workers
100% (min 12 months history)
Secondary employment

100% if the same kind of role – 50% if not the same role

Seasonal​
Up to 100% subject to 3-year history – Only as a secondary applicant
Fixed term contracts
100% subject to min 12 months history in same occupation
Maternity pay

Sole applicant – not permitted unless returning before mortgage completion.

Secondary applicant – up to 100% subject of intent to return to work within 3 months of completion

Non-guaranteed income (Regular overtime, Bonus, Allowances, non-contracted shift allowance) 
50% - as a Secondary applicant (100% if 3 years’ history evidenced)
Evidenced by  

Up to 3 months’ salary advice slip, plus, most recent P60 for guaranteed regular income.

Last 3 years P60s for non- guaranteed income. Potential to use 100% - refer to intermediary team.

See individual affordability calculation result for specific case requirement.

 

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Self-Employed Applicants

 

Income treatment 

Average of last two years’ net profit

 

Sole Trader to LTD acceptable - Must have 1st years accounts as LTD company.

Evidenced by 

Latest 2 years Tax calculations and HMRC

Tax Year Overview: & Latest years Accounts – prepared or certified by a qualified accountant  
Acceptable accountancy bodies 
  • A.C.A or F.C.A
  • A.C.A.S or F.C.A.S
  • A.C.C.A, F.C.C.A, A.A.P.A or F.A.P.A
  • A.C.C.A, F.C.C.A, A.A.P.A or F.A.P.A
  • A.C.M.A or F.C.M.A
  • A.C.P.A or F.C.P.A
  • M.A.A.T or F.M.A.A.T
  • A.A.I.A or F.A.I.A [not FAIA (acad)]
  • C.T.A (Fellow), F.T.I.I (Fellow), C.T.A or A.T.I.I
  • A.F.A (Associate) or F.F.A (Fellow)
  • C.P.F.A
  • C.A
Limited company directors 

Shareholding >20%: an average of the last two years share of net profits and director’s remuneration

Evidenced by two years audited accounts and tax calculations 

Sub-Contractors / CIS

18 months continuous service in same type of employment with minimum 6 months remaining on current contract.

We accept the gross value of the annual contract or an average of the last 3 months’ income.

Evidenced by copy of current contract and/or CIS payment and deduction certificate.

If pays own tax or sub-contracts to more than one company, we will treat as self-employed.

Discretion permitted subject to minimum of 12 months contracting history where applicant was previously in permanent employment in the same field of work.

Professional Contractors 

Maximum LTV of <=80%

Minimum of 4 weeks remaining on contract at offer or evidence of further contract accepted.

Subject to a minimum of 24 months contracting history as evidenced by accounts (Discretion may be applied subject to minimum of 12 months contracting history where applicant was previously in permanent employment in the same field of work)

Minimum calculated gross income of £75,000 per annum.

Gross income is calculated based on the current contract daily rate (as evidenced by the current contract) x Number of Days Worked x 46 weeks. 

 

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Lending into Retirement

 

Pension provision assessment depends upon length of time before retirement and how long the loan term extends into retirement:
Period from retirement 
Proof of income 
Underwriting approach 
< 10 years to retirement and/or loan extends > 5 years beyond retirement Evidence of pension income Affordability based on lower of earned or pension income

> 10 years from retirement and extends < 5 years beyond retirement

Evidence of pension contributions and

Lending into Retirement declaration (available on website)
Affordability based on earned income
Applicant already in retirement Evidence of pension income Based on pension income. Consideration given to whether index linked depending upon circumstance

 

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Retirement Mortgages (RIO)

 

The Society has Retirement Mortgage products which allow borrowers to extend the term for their lifetime using the proceeds of property sale to repay the loan. These are subject to additional criteria detailed below.

Minimum Age 
55 (youngest applicant for joint applications) 
Maximum LTV 
50% 

To establish whether your client needs a Retirement Mortgage, or a Standard product please see the Retirement Mortgage Product Eligibility table. 

Retirement Mortgage Product Eligibility
 

Capital & Interest

Interest-only repayment NOT from the mortgage property 

Interest-only repayment from mortgaged property 

Age 75 or less at maturity  Standard products  Standard products  Standard products 
76 – 85 at maturity  Standard products  Standard products 

Retirement products

Over 85 at maturity 

Standard Products

Max term 25 years

Max LTV 65%

Standard Products

Max term 25 years

Max LTV 60%

Retirement products

 

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Other Income Treatment

 

Our senior underwriters have some discretion to take into account benefits and allowances as shown below. Their decision to do this will depend on the wider merits of the individual case so we would recommend you seek a decision in principle before making an application. 
Investment Income 
50%  
Disability Living Allowance 
50% Received for minimum 6 months - Up to 100% can be used subject to DWP confirmation indefinite 
Incapacity Benefit/Employment & Support Allowance 
50% Received for minimum 6 months - Up to 100% can be used subject to DWP confirmation indefinite 
Income support / Universal Credit 
Not permitted 
Working Tax Credit 
50% - Subject to age of children
Carer’s Allowance 

Up to 100% with track record and

evidence of continuity 

Foster Carer’s allowance 
Up to 100% with min. 2 years track record 
Child tax credit
50% - Subject to age of children
Child Benefit 
50% - Subject to age of children
Income from family living in property but not on mortgage 
Not permitted 
Income from lodger (not family) 
50% Minimum 3 months. 100% 2 years history.
Property Rental Income 

50% of the tax computation (mortgaged)

80% of the tax computation (un-encumbered)
Pension Income
100% 
Maintenance 

100% subject to court order – Remaining for Minimum 5 years

Not permitted if sole income
Original documentary evidence required for all the above to be factored into affordability calculator 

 

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Impaired Credit History

 

The Society does not offer sub-prime lending and therefore applicants with any of the following Impaired Credit History record cannot be accepted.

  • Secured loan account with a payment status of 3 or worse in the last 24 months.
  • Unsecured loan account with a payment status of 3 or worse in the last 24 months.
  • 1 or more CCJ’s with a total value greater than £500 within the last 36 months.
  • Subject to an Individual Voluntary Arrangement (IVA) or Administration order within the last 36 months.
  • Bankruptcy order or Scottish Sequestration in the last 36 months.
  • Repossessions or voluntary repossessions within the last 5 year
We can consider applications where the impaired credit history (including defaults) is outside the above criteria. In such cases, the underwriters will assess the case using all relevant information including a full explanation for any adverse credit. In all cases, the enquiry should initially be referred to the Intermediary Sales Team on intermediaries@thevernon.co.uk A Decision in Principle can only be obtained following a satisfactory credit report by the Society.

 

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Property

​

Age

Any, subject to valuation

Tenure 

Freehold

Leasehold – a minimum of 50 years to remain at end of mortgage term 
Flats / Maisonettes

Maximum 6 storeys (over 4 storeys must have lift)

Discretion permitted up to properties with 10 floors subject to a minimum value of £250k outside London, £350k within London

Studio flats 
Permitted subject to a minimum floor area of 39 square meters, in line with the Government issued Technical Housing Standards - Nationally Described Space Standard 
EWS1 
  • Buildings under 4 storeys do not require an EWS1 form.
  • Buildings with 5-6 storeys may require an EWS1 form but only where a specific concern has been identified by the surveyor.
  • Buildings over 18m (typically 6 storeys) will require an EWS1 form and this will be stated on the valuation report under notes for legal representative.
Construction 

All standard construction types subject to satisfactory valuer’s comments and insurability

Non-standard construction should be referred

Generally unacceptable security 

The following are considered to be unacceptable security and are generally not permitted (however discretion may be given on non-standard construction types, subject to satisfactory Valuer’s comments and insurability):

  • Listed under the Housing Defects Act;
  • Agricultural restrictions;
  • Shared Ownership;
  • Properties which are solely for commercial use; 
  • Local authority flats & maisonettes;
  • System built concrete construction;
  • Steel clad properties;
  • Pre 1990 steel frames properties;
  • Pre 1970 timber frame properties;
  • Prefabricated/(pre) reinforced/poured or shuttered concrete construction unconventionally clad i.e. not brick, concrete or stone block;
  • Easi-form construction;
  • Pre 1970’s no-fines concrete;
  • Mundic block;
  • High alumina cement;
  • 100%Timber construction;
  • Properties built on contaminated land;
  • Mobile Homes;
  • Farms & small holdings;
  • River boats.
Flying Freehold 

Discretion is permitted for Flying Freehold properties. – subject to Valuers comments and rights of access for essential / routine maintenance.

Right to Buy 

Permitted 100% of concession price plus the addition of a Product Fee subject to:

  • Maximum 70% LTV
  • All applicants must be named on the Right to Buy papers;
  • The applicant(s) must have been registered on the voters roll at the security for a minimum of 3 years;
  • Local authority flats / maisonettes are not permitted
EPC Rating 
A Minimum Rating of E (BTL only) 

 

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Self-Build

 

Self-Build

All repayment types:

80% LTV of final value

Maximum Loan Amount             

  • £750,000 (refer if greater)

Build stages of:

  • Land – max 75% of value
  • Foundations
  • Wall plate level
  • Wind and water-tight
  • First fix and plastering
  • Second fix to completion.

All stages maximum of 75% of build cost at each stage.

Stage payments made in arrears

All new mortgage applications must be supported by a mortgage valuation report which confirms that the property to be built is suitable for our mortgage and estimates the final value.  A re-inspection will be required at completion of the build.

For stage releases - Stage inspection and sign off by Construction Industry Council approved inspector (for warranty provider) or Architect’s stage sign off.

Documentation:

Plans and elevations

Detailed costings

Copy of Planning permission

Copy of Building Regulation approval

Schedule of works including dates

Details of the structural warranty

Evidence of capital the applicant has available

Details of residence during the project

(rent/mortgage/caravan etc.)
New build 

Up to 85% LTV 

Must have NHBC certificate or equivalent 
Commercial use 

No more than 20% use for commercial

Business rates not payable 
Properties above or adjacent to commercial premises 
May consider please refer

 

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Documentation

 

I.D. 

We will carry out an electronic search against records held by a credit reference agency to verify name and address. To support this, we will require one identity document from the list below (certified copy):

  • Current UK & EU passport
  • Current photo full or provisional driving licence
  • Current old style driving licence
  • Current firearms certificate
  • Current armed forces ID card
  • EU state ID card
  • Current UK disabled driver’s pass
  • Instrument of a court appointment
  • ID card issued by Electoral Roll Office for Northern

 

Ireland

  • HMRC tax notification
  • Housing benefit notification *
  • Local authority tenancy agreement *
  • Council tax demand letter or statement *
  • Tax credit *
  • DWP state pension document *
  • Utility bill **
  • Current original bank/building society/credit union statement **
  • Current original credit/debit card statement **
  • Mortgage statement *

* These documents must be dated in the past 12 months

** These documents must be dated in the past 6 months.
Proof of income/expenditure  

Documentary evidence will vary dependent upon the case. The affordability calculator will inform what is required for an individual case.

Additional documentation where relevant

Customer into Retirement Declaration 

ESIS

Affordability calculator

Proof of deposit

Evidence of repayment vehicle Interest Only

Right to Buy notice

Building work estimates and planning permission approval

AST and Lender approval to let (where BTL exist)

Payment of Fees

Documentary evidence should be scanned as PDF and submitted through our online application system or otherwise by secure email. 

 

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Buy to Let

 

Acceptable BTL segments
  • Investment BTL < 4 properties
  • Investment BTL 4+ properties (portfolio)
  • Personal ownership
  • Ltd Company
  • Regulated BTL (MCOB/MCD)
  • Holiday Lets 
Partial business use

Subject to:

  • Business / Commercial use does not exceed 50% of floor area
  • Independent access to the residential area and (where deemed appropriate for letting use and/or saleability) with residential parking provision
  • Rent from residential area should be a minimum of 75% of the stressed ICR (on an interest only basis)
Holiday lets

Holiday Letting Agents letter confirming High, Medium, and Low Season weekly rental rates and the projected % Occupancy for each of these seasons, Letting agents letter should be an appropriately composed letter from a suitable holiday letting agent with competent knowledge of the property and its location and local market conditions.

Or

Last 2 years accounts showing income and expenditure generated from the Holiday Let
HMO
Please refer
Loan purpose

Purchase

Re-mortgage

Capital raising 
Landlord experience

Experienced BTL landlords and investors preferred. For new entrants to the market, their knowledge and experience of the property and financial markets will be taken into account. Through underwriting process all applicants will be assessed to ensure they seem competent

Min/Max age

Minimum: 18

Maximum: 80

Min Income

No minimum income requirement.

Rationale must be provided how mortgage and costs are to be maintained if shortfall in rental income

New build
Yes (subject to warranty provider)
FTB
Accepted 
Regulated BTL
Yes - Must fit residential affordability calculator taking into account existing commitments / living costs
Purpose build flats?
Yes 
Let to Buy

Let to buy will be considered, noting that such

arrangements will generally fall under the MCD regulations 
Lending Limits

Maximum exposure level of £1,5M

No max number of properties
Min/Max term
5/35 years 
Min purchase price/value
£125,000 
Min/Max loan

£50,000 / £1.5m (consolidated)

Max LTV
75% 
Interest Cover Ratio (interest only)
130% 
Stressed interest rate
Refer to product guide
Tenancy agreement
AST 6 months 
Portfolio
No Max
Consolidation (overall LTV for portfolio)
Yes 
Affordability Assessment

Investment Property Loans

In all cases actual costs will be used to assess affordability assuming a stressed rate and future tax position.

Other earned income can be taken into account – a full I/E would be required

For portfolio landlords (4 or more properties)

Portfolio Analysis spreadsheet of all existing BTL properties with details of their loans, interest rates and rents are required. This will have a stressed interest rate applied to ensure portfolio affordability

MCOB & MCD Regulated Loans: Full details of all income/expenditure required. This will be assessed using stressed mortgage rates 
Detail of existing properties/loans
Required
Accounts/business plans
Required for portfolio landlords (4 or more properties) 

 

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Buy for Uni

 

Borrowers

Sole property owner (student) but on a Joint Borrower basis

Youngest (Property Owning) Borrower to be under the age of 30 at the date of application for the loan and in full time Higher Education

The Joint (Non-Property Owning) Borrower(s) must be the parent(s) or stepparent(s) of the Primary Borrower

Course of Study details must be disclosed 
Max LTV
100% 
Min / Max Loan 

£125,000 / £500,000**

**The maximum cash sum that can be accepted as collateral/additional security is limited to £80,000, with the maximum loan consequently being restricted to £400,000
Min / Max Term

The minimum mortgage term is 5 years

25 Years or the date when any parent joint borrower reaches their selected retirement date or age of 75, whichever is earlier.

Min / Max Age (Borrower) 
18 / 30
Location / Property Type

England & Wales Only

10 Miles from University of Study

Flats /HMO – Not Acceptable
Bedrooms / Lodgers

Min 2 bedrooms

Max 4 Bedrooms (including use of a lounge/dining room as a bedroom)

Max 3 lodgers + Applicant
Affordability 

Based on the rental income.

If rental income does not support fully affordability assessment will be conducted on parents

Student Maintenance Grants can be included as income

Deposit / security

>80% either cash charge or charge on parents’ property

<80% no deposit required
Charge
We will always take a first legal charge (mortgage) over the property being purchased.
Re-Mortgage 
Not Permitted – Purchase Only

 

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Solicitors

 

Borrower’s solicitor can provide dual representation providing practice is at least a dual partnership and where Law Society guidelines permit joint representation

Solicitors acting for the Society must have professional qualifications and professional indemnity insurance of at least £1m (or the amount of the loan if higher)

 

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