Residential Lending Policy

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We offer mortgages to various people in various situations. Residential mortgages are available for the following purposes:

  • Purchases of a residential property
  • Remortgages of an existing secured loan
  • Self Build mortgages (exclusively through BuildStore Mortgage Services)
  • Capital raising
  • Additional borrowing and product transfers for existing customers

All our mortgages are provided subject to status. This means that when you request a mortgage or a remortgage quote from us we will take into account your circumstances, both personal and financial, to make sure you could borrow the maximum mortgage that suits your lifestyle and your budget. We will also consider the amount you want to borrow and the value of your home. Our decision to provide you with the best mortgage rate will depend on these factors along with any criteria specific to the mortgage product you have chosen.

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Affordability Assessment

The Society is MMR compliant in how it undertakes an affordability assessment. How much you can borrow is calculated through a combination of your income, regular financial commitments and household / lifestyle expenditure and the term required at an agreed stressed rate.

In assessing affordability all unsecured loans / HPI agreements that have more than 6 months to run, credit cards and maintenance will be deducted. In addition, deductions to applicant's disposable income will also be made for declared household and lifestyle expenditure which is compared against statistical data for accuracy.

To see how much you could borrow please visit your local branch or contact our Newcastle Direct Team on 0345 606 4488 where one of our experienced mortgage advisors will be able to assist. To ensure that your assessment is as accurate as possible please can you provide our advisors with as much information regarding your personal income and expenditure. Information on monthly expenditure such as council tax, utility bills, insurances, loans / credit cards and all lifestyle expenditure (food, clothing, socialising etc) will need to be provided.

Age of Applicants

Minimum age for applicants is 18. Maximum age for borrowers at the end of the loan term is 75.

Armed Forces Personnel

  • All applicants must have at least 2 years to serve.
  • Where the applicant will also live in accommodation provided by M.O.D. then they must be able to support both the new mortgage and any associated living costs for the M.O.D. property. This must be factored into the affordability assessment.
  • Where the applicant will be living in M.O.D. accommodation on a full time basis then the property to be purchased must be occupied by spouse/partner.
  • Where it is a sole applicant purchasing the property it must be occupied on a full time basis. It must be plausible that applicant can commute to place of work on a daily basis unless on tour overseas.
  • A 3 year residency history is required. BFPO addresses are acceptable.
  • We would expect the applicant to be contributing to at least 5% of the deposit required. This is in addition to any Long Service Award the applicant may be receiving.
  • Where the source of additional deposit is from a Long Service Award then we require full details of the arrangement as this may affect the maximum borrowing we are prepared to consider.

Buy to Let Properties

For those applicants who already have 1 or more investment mortgages we will agree up to 95% on the basis that we receive:

  • Evidence that the mortgage conduct on all investment mortgages is satisfactory with no missed payments. Sight of conduct via credit bureau data is acceptable.
  • Sight of existing Assured Shorthold Tenancy agreement (or Scottish equivalent) is required for all investment mortgages. The rental income received must cover the current mortgage payment by at least 120% to cover rental voids, management /maintenance costs associated.
  • Where the rent received does not pass the stress test then the shortfall should be taken as a monthly commitment for affordability purposes.
  • We would also require proof of rent received via last months bank statement / confirmation from letting agent acting on applicants behalf.
  • Where the tenancy agreement provided has expired then we will require proof that it has been renewed.
  • Where applicants have a significant investment portfolio (greater than 5) then we would also expect to have sight of their BTL portfolio summary.
  • A DIP is required where the LTV is greater than 80% or the rent received does not meet our stress test calculation.
  • Please see 'Let to Buy' for those applicants who are looking to rent out their existing property and purchase a new one through NBS.

British Nationals Working Abroad

  • The Maximum LTV we will consider for British Nationals working abroad is 80%. In addition, we normally expect the applicant to currently or previously have held a UK mortgage.
  • We will expect that the borrower's main residence is currently within the UK and that they will reside in the property whilst in the UK. We do not accept 'ex-pat' type scenario where the applicant wishes to purchase a property in the UK and return at a later date.
  • We will only consider applications where the applicant's spouse/partner or immediate family will be a permanent resident in the property. The property must not be left unoccupied for more than 30 days a year.
  • If the applicant is required to pay for accommodation whilst working abroad then details of this must be disclosed during the application process and deductions made within the affordability assessment.
  • We would normally expect to see salary paid into a UK bank account either direct or via transfer.
  • The employer must be generally 'Blue Chip' for both UK and International companies.

Contract Workers

  • Contract workers are considered higher risk to the Society due to affordability concerns once a set contract period has ended. For this reason we would be looking for a track record of employment within the same sector for at least 2 years. This can be evidenced via P60's.
  • Applicants who have fixed term contracts within professional occupations such as doctors, teachers and solicitors, will be regarded as in permanent employment. Applicants from contract workers in other fields will be considered on their individual merits.
  • We require sight of current contract confirming income and duration. For applicants employed on contracts of 12 months or more we would expect there to be at least 6 months to run at the time of application. For those on shorter term contracts then we would expect there to be at least 3 months remaining.
  • Written confirmation from the employer must be sought that applicant's contract will be renewed beyond the current expiry date or we have evidence that another contract has been signed with another company.
  • Applicants employed through recruitment agencies will not be accepted unless a 2 year track record in the same line of work can be established.
  • IT contractors can be considered as long as a track record within the Industry can be established. This may be evidenced via previous contracts in conjunction with P60's or SA302’s if self employed. If the applicant is employed via an umbrella company we will take the gross income as sighted via contract and payslips.

Credit Scoring

  • As part of our overall assessment, the Society will now credit score all mortgage applications to assess the credit worthiness of applicants. Applicants will be scored when they request a Decision in Principle or when the full application is received.
  • The credit score will either accept, decline or refer applications to underwriters for a manual assessment.

Defaults and CCJs

The Society will use credit scoring to determine whether to proceed with an application. Applications will normally be declined in the following circumstances:

  • Current secured arrears or recent history of non payment
  • Current unsecured arrears or history of delinquency in last 3 years
  • Any unsatisfied CCJ or Default irrespective of amount (£)
  • Any registered CCJ or default found on credit report in last 3 years
  • Any insolvency i.e. Bankruptcy or IVA is detected
  • Any evidence of previous or current property being repossesed

Family Purchases

  • Where it has been established that the property is to be purchased at a discounted price then we can consider lending 100% of the purchase price subject to valuation confirming that LTV based on open market value would not exceed 95%.
  • Additional borrowing above the discounted purchase price can only be considered subject to funds being for home improvements only and LTV not to exceed 95% of open market value. No capital raising for repayment of debt is allowed.
  • The acting solicitor must ensure that defective title indemnity insurance is arranged where a discounted purchase price is taking place. This protects the Society from future claims under the Insolvency Act.
  • The current occupant of the property would be expected to move out of the property. We will not accept a sitting tenant and the property must be vacant on completion with no charges /restrictions from previous owner remaining.
  • Maximum loan is £500,000.

Fees and Charges

The Society's general mortgage administration fees are detailed in our Summary of fees and charges, a copy of which is available upon request.

Foreign Nationals

  • The maximum LTV for Non-EEA Applicants is 80% but we will consider applications above this on referral to our underwriters via a Decision In Principle
  • All Non-EEA nationals must be able to demonstrate that they have indefinite leave to remain in the UK. Alternatively, professional applications on long term visas may also be considered where there are at least 2 years remaining.
  • Evidence of the applicants indefinite right to remain can only be verified by either a residency entitlement stamp on passport and / or visa, or by written confirmation from Home Office/UK Border Agency

General

  • All the above terms & conditions apply to residential "lending only".
  • The Society reserves the right to reject any application where the borrower has any convictions or pending prosecutions relation to financial misdemeanour or dishonesty.
  • These guidelines outline the main elements of the Society's residential lending policy, but are by no means exhaustive.
  • In the interests of security, we may from time to time record telephone calls to and from us.
  • For clarification of any aspect of our policy, or a full written quotation, please contact your local branch or our Newcastle Direct teem on 0345 606 4488.
  • A first charge will be required as security. All mortgages are subject to status and valuation. APRs are typical and variable.

Guarantors

We currently do not accept new mortgage applications that require a guarantor.

Help To Buy Schemes

The Society does not currently offer mortgages under either of the Help to Buy schemes.

ID and Residency requirements

The following information is required in support of a mortgage application:

  • In the event that the applicants are not registered on the electoral roll, they must supply proof of residence. Any utility bill, council tax bill, voters roll enquiries, bank statements or mortgage statements are acceptable, provided the original documents are supplied and they are from within the last 3 months.
  • The Society will be required to confirm identity. Acceptable documents include a passport or driving licence photocard.
  • Applicants must normally have been resident in the United Kingdom for a minimum period of three years. This can be waived for members of the diplomatic corps, a member of HM Forces, or employees of internationally based companies, providing their family will be resident in the property.
  • All Applicants (EEA & Non-EEA) who have not resided in the UK for at least 3 years will need to be referred to an underwriter for assessment.
  • Non-EEA nationals will be restricted to 80% LTV and will require evidence of indefinite leave to remain in the UK.

Income

The following sources of income are acceptable:

Primary Taxable Income (100%)

  • Basic income
  • Private pensions and annuities
  • Car allowance
  • Pay rise pending (must be within 3 months and employer to confirm)
  • Mortgage subsidy (must be permanent)
  • Housing allowance
  • Additional investment income from rental portfolio (evidenced by accounts / tax assessment / accountants reference)
  • London / Large City allowance
  • Shift Allowance (Guaranteed)

Primary Non Taxable Income (100%)

  • State Pension / Pension Credit
  • Guaranteed for Life DWP
  • Maintenance Order (CSA / Court Order enforceable)
  • Limited Company Director Dividends (net of income tax paid)

Secondary Taxable Income (50%)

  • Regular Overtime / Bonus / Commission / Shift allowance
    (2 years P60's will be required to evidence track record)
  • 2nd Job with at least 12 months service
  • Territorial Armed Forces pay

Secondary Non Taxable income (50%)

  • Working family tax credit / Family tax credit / Universal credit (where applicable)

We will accept 50% of:

  • 2nd job with 12 months service
  • Overtime / bonus / commission / shift allowance

We will not consider:

  • Unemployment benefit / income support
  • Child benefit
  • Social security payments that are not guaranteed for life (DLA etc)
  • Seasonal work
  • One off payments
  • Gratuities not sighted on payslips
  • Bursaries and scholarships
  • Investment or Trust Income that is not guaranteed

Income - Future Changes

  • Where a reduction in income is anticipated in the near future then the impact of this must be considered for affordability purposes. This would normally include applicants who are close to retirement, those that are on or due to go on maternity leave or those that are looking to reduce working hours.
  • We would expect that any future changes to income are confirmed on any DIP or application we receive so that this can be taken into consideration by our underwriters.
  • Where applicants are on or due to go onto maternity leave then we will require details of the date they are expected to return to work, the basis on which they will return (i.e. Part time / Full time) and the new salary on return to work. This will need to be verified by the applicants employer.

Income Validation

  Up to and including 80% LTV Over 80%LTV
Employed
  • 1 payslip dated from the last 2 months
  • Most recent 3 payslips and latest P60
  Note: up to 95% LTV the last P60 will also be required where overtime / bonus / commission is required to establish track record.
Self employed (Sole Trader / Partnership/LLP)
  • Last 2 years business accounts AND
  • Last 2 years HMRC Tax assessments (SA302)
  • As opposite PLUS
  • Projection for the current year from qualified accountant
Limited Company (greater than 15% Shareholding)
  • Last 2 years business accounts AND
  • Last 2 years Tax assessments (SA302)
  • As opposite PLUS
  • Projection for the current year from qualified accountant
  Note: for limited company Directors where affordability is based on dividend income as opposed to share of profit we will still require sight of last 2 years HMRC  Tax Assessments (SA302’s)

For all forms of additional income which is being taken into account, documentary evidence will be required.

Lending into Retirement

Lending into retirement applies to both those applicants whose mortgage term will take them beyond normal or anticipated retirement age and those who are already retired.

Where applicants are approaching retirement:

  • Where the applicant(s) are within 10 years of normal or expected retirement at application and the term requested will take them into retirement then we must be provided with documentary evidence that a pension is in place.
  • Where the applicant(s) are within 5 years of normal or expected retirement at application and the term requested will take them into retirement we must assess affordability solely on post retirement income. It will be a mandatory requirement that we are provided with documentary evidence of post retirement income that is sufficient to service the mortgage for the whole term.

Where Applicants are currently retired:

  • Affordability will be assessed solely on post retirement income.

In both instances, the maximum age for borrowers at the end of the loan term is 75.

Let to Buy

Let to Buy is where the borrower is not redeeming the mortgage held on their existing property and is looking to let this out whilst purchasing a new property as their main residence

Loans will be considered on the following basis:

  • We obtain consent to let from the existing lender or a copy of the new BTL offer
  • We obtain evidence from 1 registered ARLA / NLA letting agent of expected rental income
  • The expected rental income passes the NBS rental stress test. This is 120% of the mortgage payment set at 5% fixed on an interest only basis
  • Where the rent received does not pass the stress test then the shortfall should be taken as a monthly commitment for affordability purposes.

We will consider loans above 80% LTV on referral to an underwriter via a Decision in Principle.

Loan Amounts

  • Minimum/maximum loan amounts are product specific.
  • Minimum mortgage advance is £10,000 (or £1,000 for further advances), maximum advance is £1m. Loans over £500,000 will require Executive approval and must be submitted initially as a Decision in Principle

Loan Purpose

The Society makes mortgage finance available for:

  • The purchase of residential properties for owner occupation, including the purchase of residential properties for a family member to reside in. Normal criteria caps lending at 95% loan to value inclusive of fees.

Remortgages:

  • 95% maximum LTV. Can borrow more than owe current lender, subject to the following rules:
    • Home improvements - estimates not required up to 80% LTV. Over 80% LTV - the requirement for estimates is at the discretion of the underwriter.
    • Remortgage fees can be added to the loan if the final LTV does not exceed 95%, product terms permitting.
    • Capital raising is not allowed for business use, currency speculation or to repay gambling debts. The maximum LTV is 80% for all applicants.

Loan Term

Minimum repayment term is 5 years (or 3 years for further advances) with a maximum loan term of 35 years.

Loan to Value Limits

Loan Amount Maximum Loan to Value
Up to £350,000 95%
£350,001 to £500,000 90%
£500,001 to £750,000 80%
£750,001 to £1,000,000 75%

Please refer to specific product details for maximum LTV

  • Max LTV's are product specific and may vary from time to time.
  • Remortgages for capital raising purposes are not permitted on a mortgage above 80% loan to value. Capital raising is described as anything other than the replacement of a home purchase loan or a loan for the purposes of home improvement.

Number of Mortgage Applicants

Maximum number of applicants is 2.

Pay Day Loans

Applications will be referred to our underwriters for review in the following circumstances:

  • 1 or more pay day loan taken out in the last 6 months
  • 2 or more in the last 12 months

Where there is track record of applicants taking pay day loans frequently over the 12 month period then the underwriters reserve the right to decline the application.

Professional Sportspersons / Entertainers

  • For contracted applicants we will require a copy of the applicants current contract and it must have at least 1 year still to run.
  • Where applicants are self employed then we require 2 years trading accounts and last 2 years Inland Revenue Tax Assessments.
  • For applicants who are coming towards the end of their professional career and especially for sportspersons, documentary evidence will be required to establish how they intend to support the mortgage post career.
  • There is no restriction on age or term other than normal policy guidelines.

Property Information

  • All properties must have a minimum purchase price or valuation (whichever is lower) of £50,000
  • The Society will make advances on any acceptable security in England, Scotland & Wales.
  • Properties in Scotland still require a transcript of existing report from the applicant on the proviso that the valuer is on our panel and the transcript is completed on NBS papers. Alternatively, we will instruct our panel valuers.
  • The tenure of acceptable properties will be freehold or leasehold in England, Wales, and Northern Ireland, or their Scottish equivalent.
  • All properties must be assessed by a suitably qualified valuer with sufficient professional indemnity cover. All valuation instructions (with exception of Scotland) will be made by the Society via our nominated panel. Third party instructions are not acceptable.
  • For new build properties will consider up to 90% LTV for houses and 80% for flats Any incentive that has a material affect on the value of the property will be deducted as detailed by the CML Incentive Disclosure form.

For Example:

Builders/Developers Deposit Contribution:
Agreed Sale Price = £100,000
Deposit Contribution = 5% (£5,000)

Sale Price Less Deposit Contribution= £100,000 - £5,000 = £95,000

Maximum Borrowing (New Build House) = £85,500 i.e. 90% LTV Max
Maximum Borrowing (New Build Flat) = £76,000 i.e. 80% LTV Max

Builders/Developers Stamp Duty Contribution:
Agreed Sale Price £300,000
Stamp Duty Contribution = 3% (£9,000)

Sales Price less Stamp Duty Contribution = £300,000 less £9,000 = £291,000

Maximum Borrowing (New Build House) = £261,900 i.e. 90% LTV Max
Maximum Borrowing (New Build Flat) = £232,800 i.e. 80% LTV Max

Please contact BuildStore to discuss your client’s requirements in full.

Repayment Types

We accept applications on a repayment basis only. Loans on an interest only or part interest only basis do not meet our lending criteria.

Right to Buy

  • We will consider lending 100% of the discounted purchase price as indicated in the offer agreement between tenant(s) and Local Authority / Housing Association.
  • We will also consider lending additional funds up to a maximum of 80% LTV of open market value subject to funds being used solely for home improvements.
  • It will be a requirement that estimates for the works to be carried out are received prior to us instructing the valuation. We will consider lending up to £5000 maximum upfront to fund immediate home improvements as long as any additional funds are retained until all works completed and a reinspection confirms.
  • It will be a condition of the mortgage that any additional funds in excess of the discounted purchase price will still rank higher than the Local Authority's charge on the property.
  • Under no circumstances will we lend additional funds for capital raising including payment of fees to any solicitor or third party.
  • Only the applicants named on the Right to Buy offer agreement can be named on the mortgage.
  • The Society's charge should always be registered as first priority ahead of any Local Authority.
  • The valuer must confirm that there is a ready and sustainable demand for the property to be mortgaged. In addition, the valuer should look to confirm that there is at least 50% private ownership within the immediate vicinity.
  • Flats will be considered as long as adhere to current policy i.e. no high rise flats, maximum 4 storeys.Note that maximum LTV would be 50% of the open market as per our standard criteria for ex local authority flats.
  • Further Advances will be considered subject to all funds must be used for home improvements within the discount period.

Second Homes

Second homes / holiday homes must be strictly for the sole use of the borrower and dependent family members and must not be let. The maximum loan to value for such properties is 75% and the applicants financial status must be sufficient to cover both loans where we will deduct the applicants main mortgage as a monthly commitment. Maximum loan is £500,000.

Self Build

We offer Self Build mortgages exclusively via BuildStore Mortgage Services who can be contacted on 0345 606 4488. Alternatively, visit their website www.buildstore.co.uk for more details. We offer Self Build mortgages on the following basis:

  • Where applicants wish to buy land and build a new property
  • We will consider lending up to 80% LTV to purchase land / property and up to 80% of cost of each stage during the build subject to valuation
  • Funds are released on an arrears stage payment basis

Self Employed

  • Self Employed applicants must have been trading for a minimum of 3 years to accurately assess track record within chosen line of work. Where applicants do not have 3 years trading it will be at the discretion of the underwriter to approve.
  • The income level to be used will be based on the average of last 2 years net profit. Where profits have declined in the last 12 months then we only use the most recent year to assess for affordability. We may also require a projection from the applicants accountant to ensure that this trend is not continuing.
  • Where net profit has declined in consecutive years or drawings continue to exceed net profit then the application will be declined.
  • Applicants who have more than a 15% shareholding in a limited company will be classed as self employed for our purposes and 2 years accounts will be required. Income will be assessed by using salary paid and their share of any net profit or dividends.

Source of deposit

  • The deposit must come from the applicants' own resources. Gifted deposits from parents and other relatives will be allowed subject to there being no repayment vehicle in force and the underwriter being happy with the arrangement.
  • Where the source of the deposit is confirmed as 'savings' the Society reserves the right to see documentary evidence of the deposit prior to completion. We do not accept deposit funds that are held overseas. They must be deposited into a UK bank account.

Unacceptable Properties

  • "Flying-freehold" - if more than 25% of property involved.
  • Houses with rooms let or likely to be let to several tenants where premises have not been converted or constructed for this purpose.
  • Properties where the unexpired lease has less than 70 years remaining on application.
  • Unmodernised flats and flats which are above commercial premises. Exceptions can be made for exclusive developments and certain areas of larger British cities where the valuer has confirmed that there is a ready and sustainable demand.
  • Studio flats are normally unacceptable but may be considered in prestigious developments where a ready and sustainable demand exists.
  • Large old unmodernised houses where accommodation is in excess of the applicant's requirements, particularly where there are attics and/or basements.
  • Back to back houses.
  • Council houses built in a non-traditional way, i.e. prefabricated reinforced concrete.
  • Ex Local Authority flats where LTV will exceed 50% (except in Scotland)
  • Freehold flats with the exception of 'Tyneside Flat' style or where the application will own a share of the freehold with a management company in place to oversee the maintenance of the building.
  • All flats over 4 storey and /more than 20 flats within the same block need to be referred for approval
  • Houses with restrictions to ownership (e.g. retirement flats, restrictions on occupation to local inhabitants). This list is not exhaustive and any application where there is a restriction should be referred to an underwriter.
  • Properties with any agricultural restrictions.
  • Houses under shared ownership / equity where a sales restriction / charge will remain on the property despite the borrower owning a 100% share. In addition, we will not consider any application where the borrower is looking to remortgage to the Society and capital raise to purchase an increased share in the property
  • Mobile homes or caravans.
  • Houseboats.
  • Uninsurable properties e.g. due to flood risk.
  • Uninhabitable properties (e.g. no kitchen/bathroom/roof/mains services not connected).
  • Properties with invasive plants (i.e. Japanese Knot weed) within the immediate curtilage of the property.

Last updated 16th June 2014


YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Mortgage Help & Next Steps

  • Talk to our mortgage advisors
    0345 606 4488(local rate charge but calls from mobiles may cost more)
  • Or pop into your local branch
    FIND YOUR BRANCH
 
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