Buy to Let Lending Guide

Transcription

1 Buy to Let Lending Guide N.B. This is not Leek United Building Society s full Responsible Lending Policy and is provided for guidance purposes only Properties must be let on an Assured Shorthold Tenancy basis between 6 and 12 months. Loan Size Minimum 75,000* Maximum 500,000* Mortgage Term Minimum 1 year* Maximum 30 years* Repayment Type Capital and interest basis, or interest only basis or combined interest only and capital and interest basis. Loan to Value (LTV) Maximum 75% (including fees) Loan purpose Purchase Remortgage The maximum LTV is calculated on the lower of the purchase price or valuation. If any incentives are being offered by developers or a vendor, these are deducted from the purchase price before the maximum LTV is calculated. Deed of gift/purchase at undervalue are acceptable from an immediate family member e.g. parent, grandparent, brother or sister. Solicitors are to ensure the Society s interests are fully protected. All loans must be secured by first legal charge on freehold or leasehold property. All second charges registered against the property would need to be repaid or postponed in favour of the society s loan/further loan. The property must have been owned by the applicant for at least 6 months in respect of a remortgage or in the case of a purchase the present vendor must have owned it for at least 6 months. Unacceptable Th Capital raising for business purposes, sale and rent back, student tenants, DWP tenants, properties used for holiday lets, HMO s (must be occupied by a single family unit), properties being purchased from the applicant/s own business and properties that require items of essential repair and/or are not in a satisfactory condition. Property Property Types Standard construction, modern timber framed brick/block infill (post 1970), steel framed (built after 2000), flying freeholds up to 25%, land up to 1 acre (including gardens), thatched roofs, flat roofs (subject to satisfactory insurance). Properties built in the last 10 years with any of the following - NHBC, Zurich Municipal, Premier Guarantee, Architects Completion Certificate, Build Zone, Local Authority Building Control (LABC New Home Warranty). Property Continued Location England (including Isle of Wight) and Wales Continued. 1

2 New Builds/Newly renovated or converted properties Please provide a copy of the Council of Mortgage Lenders (CML) disclosure of incentives form with the application. This is required to evidence any incentives being offered to purchase the property by the developer. If there is a financial incentive, it will be deducted from the purchase price before calculating the maximum loan amount available. A copy of the form is available from the estate agent or the developers. Auction Properties Where a property is being tendered for sale through an auction, a mortgage application can be considered. The application is processed and if acceptable, the mortgage offer must be issued prior to the auction date. Tenure Freehold. Leasehold, with a minimum of 50 years remaining on the lease at the end of the mortgage term Insurance Every property mortgaged to the Society must be insured on a landlord s policy for the full buildings reinstatement value as a minimum requirement. Applicant/s arranging their own insurance will be charged a one off administration fee to cover the Society s costs of providing a contingency insurance policy. This fee is currently 25 and is deducted from the loan amount. The Society can provide a quotation for landlord s house insurance, please contact us accordingly. Please note the details of the proposed insurance policy are required before a formal mortgage offer can be issued. (Please refer to question 17 on the mortgage application form). Property Valuation A standard mortgage valuation is required by the Society the cost of which is borne by the applicant/s. These are included in the Society s Mortgage Fees and Charges Leaflet ) click here. The standard mortgage valuation is purely for the benefit of the Society to decide if the property is suitable mortgage security. Should the applicant/s require a more in depth survey for their purposes, we can arrange a Homebuyers report prior to instruction of the standard mortgage valuation, at an additional cost to the applicant/s. Please ask for further details. Applicant Minimum age - 18 Maximum number of applicants - 4. Two completed application forms are required and all four applicants are to sign the declaration page on both mortgage application forms. Residency The applicant/s must satisfy one of the following criteria: UK citizen EU citizen who for at least the last 12 months has been resident and working in the UK. For the 2 years prior to this they must have been living in the UK or another EU country. Evidence of working in the UK will be required such as an employment reference or P60 as well as payslips. Non EU citizen who can provide evidence of their right to reside and work in the UK and have done so for at least the last 2 years. The Society will not lend to UK nationals who are not UK resident (ex-pats). The applicant/s must own their own residential property or receive sufficient income to support the loan based on standard income multiples and an affordability assessment (see affordability section). Regulated Buy to Lets applicants must receive sufficient income to support the loan based on standard income multiples and an affordability assessment (see affordability section). A maximum portfolio of 15 properties, whether mortgaged or mortgage free (in addition to the main residence). 2

3 Identification The Society will perform electronic ID checks. Where the applicant/s identity cannot be verified electronically, documentary evidence is required by obtaining one item from List A and at least one item from List B below:- List A (proof of name) Current UK Passport Current UK Drivers Licence / Card (not provisional) Benefit or Pension Book Armed Forces, Police, Fire or Ambulance ID Card Disability Badge, which includes a photograph (Preferably Passport to be obtained) List B (proof of address) Bank/Building Society or credit card statement less than three months old Utility Bill (gas, electric, telephone) less than three months old Council tax bill Latest Buildings Insurance Renewal Notice Notice of Tax Coding Vehicle Registration Document Medical Card Building Society Passbook Current UK Drivers Licence / Card (not provisional) Pension/Benefit Book (All must show their address) Status A credit search will be carried out to assess the applicant/s credit history covering the last 2 years. All current credit commitments are assessed for reasonability only. The maximum loan available is calculated on the valuation/purchase price of the property and satisfactory proposed rental income approved by the Society s valuer. If the application is being considered on earned income/affordability rather than rental income - Credit cards, mail order and overdraft balances are calculated at 3% of the current balance outstanding and deducted from the useable annual income before applying income multiples and is subject to a satisfactory affordability assessment. Please ensure any student loans or child care vouchers are included on the application form. N.B.- Non disclosure of current commitments is considered a fraudulent declaration and could lead to the application being declined. Please ensure all commitments are fully disclosed on the application form before submitting to the Society. All mortgage accounts held in the last 12 months secured on the applicant/s main residence or the new mortgage security if a buy to let remortgage, will require evidence of monthly payments from the credit report or bank/mortgage statements. All mortgage and credit commitments must have been fulfilled satisfactorily. However, we will consider 1 CCJ or 1 Default of 500 or less, registered over 3 years ago, with no other adverse credit, and a satisfactory explanation is provided Maximum 75% LTV. Unacceptable Discharged/undischarged bankrupts or applicant/s with convictions, other than those which are spent under the Rehabilitation or Offenders Act 1974 Any prosecutions pending relating to any form of dishonesty such as theft, robbery, fraud or arson or which may have a bearing on borrowers future employment Previously declined application in the last 12 months (other than due to credit score or standard of the previous property) Applicant/s have had a property repossessed Applicant/s offered voluntary surrender of a property Individual Voluntary Arrangements Applicant/s who have taken out a pay day loan within the last 2 years Income 3

4 All applicant/s must have a minimum combined income of 20,000. Rental income must be at least 125% of the mortgage interest at the Society s current standard variable rate (SVR). Employed applicant/s The employment must be permanent and not subject to a probationary period or notice of termination. The last 2 months payslips are required If the payslips are internet generated, the last 2 months bank statements showing the salary credits are also required. An employment reference may be required if considered necessary. Self employed applicant/s Must have been trading for at least 2 years. Income for lending purposes is arrived at by using the average of the last 2 years net profit. If the latest year s net profit is lower than the previous the lower figure will be used for calculation purposes. However, if profits are declining, please contact us. Where the accountant is suitably qualified, an accountant s enquiry letter is obtained by the Society. Approved qualifications: - The Institute of Chartered Accountants The Association of Chartered Certified Accountants The Chartered Institute of Public Finance Accountants The Chartered Institute of Management Accountants Where the applicant/s submits self assessment or the accountant is not qualified, the last 2 years SA302 s are acceptable. The Society reserves the right to request full trading accounts prepared by a suitably qualified accountant if the size of the business is such as to warrant this or if we are not satisfied with any aspect of the above. Contract work - please contact us for further details. Agency work unacceptable. Working for Family The last 2 payslips, P60 and last 2 months bank statements are required. Affordability If the applicant/s are not the owner of their current main residence or it is a regulated buy to let application, we will apply standard income multiples of up to 4.25 x single income or 4.25 x joint income and is subject to a satisfactory affordability assessment. We will allow up to 4 borrowers and will consider the two highest incomes only. If the affordability assessment is not satisfactory, in the instance of a remortgage of an existing buy to let property only, the rental income can be taken into account to assess the loan amount. This would be subject to satisfactory 3 months bank statements to evidence the rental income. Income 100% of basic annual income, regular dividends, pension income, car & large town allowances, housing allowances (police officers), placement income (foster carers) Teachers Learning Responsibilities (TLR). 50% of guaranteed overtime, guaranteed bonuses and shift allowances, maintenance (confirmed by court order or 6 months track record), secondary income (continuous 12 months). 4

5 Unacceptable Income Wages paid in cash Any type of benefits Any type of tax credits Commission Investment income Regular overtime or bonus not guaranteed Zero hours contracts. E.g. Bank work/supply staff such as teachers and nurses Income received where the applicant does not pay tax in the UK N.B. The lending guide is not the Society s full Responsible Lending Policy and therefore is not representative of our full lending criteria. Should you have any queries, or you wish to place an application with the Society, please contact the Mortgage New Business Team on *Subject to product terms and conditions 5