Adviser Guide
Lending Area
Property to be used as security must be in England or Wales
Residential Loan Criteria
Minimum purchase price
£140,000
Minimum loan
£25,000 (Subject to current product range)
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
70% LTV - £1.8m
<80% LTV - £1.0m
80-85% - £500k
85-90% - £450k
90-95% - £350k
Capital raising
Accepted
Debt consolidation
Accepted (Max LTV 80%)
Interest-Only
Max LTV
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 £450k and there is a plausible downsize plan)
The Society will review any proposed repayment plan for plausibility
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.
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
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% - (100% with 2 years P60s provided)
Evidenced by
Up to 3 months’ salary advice slip, plus, most recent P60 for guaranteed regular income.
Last 2 years P60s for non- guaranteed income. Potential to use 100% - refer to intermediary team.
See individual affordability calculation result for specific case requirement.
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 lower of 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.
Lending into Retirement
Pension provision assessment depends upon length of time before retirement and how long the loan term extends into 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
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%
Retirement Mortgage Product Eligibility
To establish whether your client needs a Retirement Mortgage, or a Standard product please use the Retirement Mortgage Product Eligibility reference below:
Age 75 or less at maturity
Capital & Interest
Standard products
Interest-only repayment NOT from the mortgage property
Standard products
Interest-only repayment from mortgaged property
Standard products
76 – 85 at maturity
Capital & Interest
Standard products | lending into retirement Max LTV 75% | lending in retirement Max LTV 70%
Interest-only repayment NOT from the mortgage property
Standard products
Interest-only repayment from mortgaged property
Retirement products
Over 85 at maturity
Capital & Interest
Standard Products | Max term 25 years | Max LTV 65%
Interest-only repayment NOT from the mortgage property
Standard Products | Max term 25 years | Max LTV 60%
Interest-only repayment from mortgaged property
Retirement products
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
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 48 months. (refer to Intermediary team)
- 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.
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 and/or >4 storeys without a lift, 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)
Self-Build
All repayment types:
80% LTV of final value
Maximum Loan Amount
<=80% LTV - £1,000,000
<=70% LTV - £1,800,000 (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.
Where funds are recognised as having been ringfenced and designated to cover monthly payment of mortgage/rental costs, and where applicable specific property costs (i.e. utilities, council tax, etc), these can be ignored for affordability.
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
Documentation
I.D. / Proof of Address
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.
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
£140,000
Min/Max loan
£50,000 / £1.5m (consolidated)
(£1.8m for <=70% LTV)
Max LTV
75%
Interest Cover Ratio (interest only)
BTL
Basic Rate Taxpayer: 130%
Higher Rate Taxpayer: 145%
LTD Co: 130%
HBTL
Basic Rate Taxpayer: 145%
Higher Rate Taxpayer: 145%
LTD Co: 145%
HMO
Basic Rate Taxpayer: 150%
Higher Rate Taxpayer: 170%
LTD Co: 150%
Stressed interest rate
Refer to product page
Please be aware, fixed rate products will have alternative ICR calculations if stressed at the pay rate.
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)
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
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)