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Residential | A-C

Lending criteria – residential

You can now access calculators, help guides and support in the Intermediary Hub

Use the links below for details of our residential lending criteria and help with submitting the right documentation.

Packaging checklist

Lending Criteria at a glance

Use our A to Z tool below for details of our residential lending criteria

Use our A to Z tool below for details of our residential lending criteria

  • Additional borrowing

    Requests for additional borrowing by existing mortgage customers must always be treated as a new lending proposition with the purpose of the additional borrowing fully detailed. The total aggregate borrowing required is applied against current policy rules with the exception of age/term when it is the additional borrowing amount only that should meet current policy rule requirements.

    A maximum LTV of 85%* may be considered (subject to product availability). A maximum LTV of 80% applies where the purpose of additional borrowing (ie further advance) is for debt consolidation.

    * Maximum LTV for additional borrowing on interest only will depend on the repayment vehicle selected, see interest-only policy section.

    For all new lending requests a valuation must be carried out irrespective of when the original valuation was undertaken.

    • Additional borrowing applications can exceed the term of the main mortgage account, but must not exceed a maximum term of 35 years (25 years for Interest Only, or Family Springboard during the Deposit Term) from initial drawdown of the original facility
    • Interest only – it is the total new aggregate amount of interest-only borrowing, including any existing, that must meet current interest only standards requirements, including repayment plan, plausibility assessment and minimum income
    • Current interest only standards requirements with regards to repayment plan and LTV must be met where there is any change in the repayment plan to that which the interest only lending was originally assessed against – this applies whether the additional lend is on an interest-only or repayment basis
    • For any applications involving the consolidation of an existing MCA Reserve debt, a condition of offer must be accepted by the customer that their MCA Reserve limit shall be reduced to zero/capped and any rebalancing feature be switched off
    • Additional borrowing is not allowed to support any demolish and re-build scenarios which are seen as a clear breach in Mortgage Terms & Conditions entered into by the borrower.
  • Adverse credit history

    County Court Judgements (CCJs/defaults)

    Adverse credit as detailed below must be declined:

    • Any unsatisfied CCJ
    • More than 1 satisfied CCJ and the latest is registered within the past 3 years
    • Satisfied CCJs totalling more than £200 and the latest is registered within the past 3 years
    • More than 3 satisfied defaults* and the latest is registered within the past 3 years
    • Satisfied defaults* totalling more than £200 and the latest is registered within the past 3 years
    • Any outstanding default, irrespective of amount
    • If it is identified that a limited company, in which an applicant has greater than 15% shareholding, has any outstanding judgements totaling more than £5,000.

    *Includes partially settled defaults which will be referred out to check whether full and final settlement has been made

    Applications can be considered where the above is identified but only where documentary evidence of a settled dispute has been provided by the customer.

    Over-indebtedness

    Where the total unsecured bureau debt (credit cards, overdrafts and loans) is greater than or equal to the gross annual income used in the affordability assessment then the application will be declined. This includes where customers were looking to consolidate the borrowing on to the mortgage.

    These standards only apply on drawn balances (unused credit limits are not included). This calculation is automatically applied by the system.

    Bankruptcy/Debt Relief Orders/IVAs

    Lending to a customer with a history of bankruptcy OR who has been the subject of a Debt Relief Order (DRO) or an Individual Voluntary Arrangement (IVA) can be considered provided any bankruptcy, DRO or IVA was registered more than 6 years ago from the date of submission of any mortgage application and no longer shows on the credit reference bureau information.

    It is not acceptable to lend where we are aware that any applicant is currently bankrupt or subject to a DRO and/or IVA.

    Payment arrears/missed payments

    Any adverse credit identified, as detailed below, must be declined

    • Arrears of 2 or more months on any one account in the last 6 months
    • Arrears of 3 or more secured or unsecured in the last 2 years

    Mortgage or rent arrears

    If arrears of more than 1 month have occurred in the past 6 months, and/or 3 months arrears have occurred in the past 2 years, the case is outside lending policy and is to be declined. However, this decision could be changed if there is an acceptable 'technical' reason, or if evidence of a settled dispute is provided and verified by the lender.

    If this is the case, please contact the Intermediary Business Centre on 0345 073 3330 * to discuss whether we will be able to assist. Lines are open Monday to Friday 9am-5pm.

  • Affordability

    It is important that we demonstrate that an applicant can reasonably afford to repay their mortgage before we agree to enter into a regulated mortgage contract with them. The use of income multiples alone is not sufficient to assess the maximum amount we'll lend.

    Your client’s affordability will also be assessed using information collected in the 'Affording your Mortgage' section of our application. Here, you'll need to detail their regular financial commitments to show that they can afford to make the required monthly repayments.

    There are several factors to take into account when assessing your client’s ability to repay their mortgage:

    Income assessment 
    This should include the applicant’s actual verified income, net of tax and National Insurance. When making a lending decision or contract variation the underwriters can consider various sources of income (please see the requirements table). The underwriter must consider the variability of the income over time to ensure the mortgage payments remain affordable to the customer. Variable (or non-guaranteed income) must be verified over a sufficient period to inform an assessment of sustainability.

    Expenditure assessment 
    The data captured in the application must take into account committed expenditure (eg credit cards, overdraft, council tax, loans, hire purchase, school fees). Basic essential expenditure and basic quality of living costs will be accounted for in the affordability model.

    Monthly mortgage commitment
    The monthly repayment must be met from the applicant’s actual or reasonably anticipated income. If the applicant intends to repay from resources other than income, reference to information given by the applicant must be given on the application form.

    For repayment mortgages
    The monthly repayment used in affordability must be calculated on a capital and interest repayment basis. This should be based on the applicant's current affordability rate or pay rate, whichever is higher (please see current product rate sheets for details on the affordability rate). This should also be based on the term of the mortgage or until the applicant is 70, or at the normal retirement of the principal applicant (main income earner), whichever is sooner.

    For interest only mortgages
    The monthly repayment used in affordability must be calculated on a capital and interest repayment basis at the current affordability rate or pay rate, whichever is higher (please see current product rate sheets for details on the affordability rate). This should be over an assumed term of 25 years or until the applicant is 70 or at the normal retirement of all applicants, whichever is sooner. Please note, for interest only mortgages the maximum term is 25 years. Where income into retirement from any applicant is required to meet affordability, it is not acceptable to lend on an interest-only basis.

    Second or subsequent properties
    Second or subsequent properties: commitments in the form of mortgage payments on second properties, other than those on properties confirmed as Buy to Let or Permission to Let properties, should be applied on a standard repayment basis over the outstanding mortgage term at the current affordability rate or current payment amount, whichever is the higher when assessing affordability. Where a credit limit applies to the existing mortgage borrowing, then it is this figure, including any undrawn monies, that should be used when assessing affordability.  For properties that are let, any shortfall between monthly rental income received and actual monthly mortgage payment should be included as a commitment.

    In addition, a fixed-value commitment for each additional mortgaged residential property held is applied by the system to cover all other costs – this only applies to other residential properties, ie, second residential homes, but not any property confirmed as being on a Buy to Let or Permission to Let basis.

    The running costs of any unencumbered second property need to be included in the affordability assessment – please manually enter figures on the Commitments screen.

    Remaining disposable income
    The applicant’s 'disposable income' – ie, their monthly income after accounting for regular commitments as detailed above, must be sufficient to cover all other general living expenses, eg food, clothing, utility bills, hobbies.

    Disposable income requirements are set by Barclays and must be met in all instances. Where these levels of disposable income are not realised, the application should be declined.

  • Age/Term

    Minimum age: 18

    Maximum age at end of mortgage term:
    Usually the maximum age at the end of the mortgage term should be 70 or retirement age – whichever is sooner. Where the end of term date of the mortgage would be later than this for any applicant, applications will still be considered on an individual basis. Full detail must be provided of how the borrower/s will fund the mortgage into retirement or beyond age 70 with documentary proof being submitted evidencing affordability for the full mortgage term.

    To assist our underwriters documentary evidence to demonstrate serviceability into retirement must be provided. Together with confirmation that you have discussed affordability into retirement and that your client is comfortable they will be able to meet the mortgage repayments until the end of the mortgage term.

    Note: Applications can be considered on a repayment or interest only basis where one or more applicant will be retired (past normal retirement age) or aged over 70 at maturity of the mortgage, either where affordability requirements are met by younger applicant/s or where customers can evidence their ability to repay the mortgage into retirement.

    For new interest only mortgage customers, the term cannot extend into retirement.

    Mortgage term: 5-35 years (25 years for interest only – including part and part).

    Certain products may also have different requirements around their maximum mortgage term eg, Family Springboard, Help to Buy: mortgage guarantee.

     

    To understand the list of documents, please click the link below.

  • Allowable income table

    Allowable income table

    Allowable incomes

    % Allowable

    Acceptable evidence

    Basic income

    100%

    Latest month's payslip and latest Bank Statement

    Monthly bonus 2

    50%

     

     


    100%

    Latest 3 months' payslips and latest Bank Statement
    Please note, where amounts vary, we will use the average value as primary income 1



    At least 3 months' payslips, last year’s P60/HMRC Annual Tax Year Overview and latest bank statement



    Please note, where amounts vary, we will use the average value as primary income 1

    Monthly overtime or commission 2

    50%




    100%

    Latest 3 months’ payslips and latest bank statement
    Please note, where amounts vary, we will use the average value as primary income 



    Latest 3 months’ payslips, past years’ P60/HMRC Annual Tax Year Overview and latest bank statement



    Please note, where amounts vary, we will use the average value as primary income

    Annual bonus (residential mortgages) 1 2

    100% for income multiples (50% for affordability)

    Past 2 years’ P60/HMRC Annual Tax Year Overview and latest bank statement


    OR

     

    Where customer(s) ONLY receives basic income, allowances and annual bonus, the last 2 years’ worth of annual bonus payslips can be used.

     

    Additional documentation may be requested during the underwriting process



    Please note that the lower of the two year average or the most recent bonus must be included in the application. 100% of the bonus income will be utilised for the income multiples purposes, however only a maximum of 50% will be considered for mortgage affordability

    • Note: Payslips and Bank statements from a previous month can be accepted up to a maximum of 14 calendar days after the issue of the current month’s documents.

    Sole Traders Partners/Directors/Limited Companies/Limited Liability Partnerships/Foster Carers:
    Applicants must provide a combination of the following documentation as a minimum requirement:

    Allowable income table 2

    Year 1 (most recent)

    Year 2

    Tax Calculation*

    Tax Calculation*

    AND

    AND

    Corresponding financial accounts produced  by a qualified accountant OR HMRC Tax Year Overview

    HMRC Tax Year Overview

    Where retained profit or dividends are being used

    Year 1 (most recent)

    Year 2

    AND

    AND

    Corresponding financial accounts produced by a qualified accountant

    HMRC Tax Year Overview

    *A tax calculation is either

    An online print out from the HMRC website showing the breakdown of the customer’s income – customers should be recommended to use this approach

    or

    The calculation or computation submitted by the customer’s account to HMRC, this should be produced via accountants’ commercial software and will need to have the unique HMRC reference number and customer’s name.

    or

    SA302 provided by HMRC – where an online version isn’t available

    Tax Year Overviews should only be accepted where they demonstrate full payment of any tax liability. Where year 2 documentation doesn’t demonstrate this, underwriters have the discretion to request financial accounts. However, any outstanding tax liability must be accounted for when assessing affordability.

    At the discretion of Mortgage Services, if the most recent (year 1) financial accounts or Tax Year Overview aren’t available when verifying income for limited liability partnerships then a letter from a finance/senior partner confirming income can be accepted to support the tax calculation documentation. This can be verified by bank statements.

    It’s not acceptable to rely on tax calculations alone as verification of UK taxable income.

    All supporting documentation provided for the most recent year (Year 1) must relate to a period ending no earlier than 18 months prior to the date of mortgage submission.

     

    Retained profit (for directors of limited companies)

    100%

    Retained profit may be accepted but will be referred for manual assessment by an underwriter in all cases

    Please see Self-employed section for acceptable evidence

    Taxable allowances
    (eg mortgage subsidy, car allowance, shift allowance, large town allowance)

    100%

    Latest month’s payslip if allowances are not variable and paid monthly (5 payslips if paid weekly). If the allowance is variable and/or paid less frequently than monthly, 3 months’ payslips are required. 

     

    Corresponding bank statement(s) is required

    Private or company pension

    100%

    Pension statement, latest bank statement

    Unearned income from trust funds etc, which are free from encumbrances and confirmed by an accountant and tax assessments

    100%
    Subject to sustainability over the term

    Evidence showing a regular income from this source: 3 months’ bank statements and evidence of the source, eg, portfolio of stocks and shares

    Maintenance payments

    100%
    Subject to sustainability over the term

    Court order, CSA/Child Maintenance Service Arrangement or an established 12-month track record of payments evidenced by bank statements. Care assessment of sustainability and continued affordability

    Foster income

    100%
    Subject to sustainability over the term

    Foster income should be recorded and evidenced as per self-employed income (see 'self-employed' section).
    The number of children under foster care should be included as dependants for affordability purposes

    Working tax credits

    100%
    Subject to sustainability over the term

    HMRC tax credit award letter (all pages) or, if award letter not available, 3 months’ bank statements clearly identifying the source of the income as being an acceptable benefit.

    Care: assessment required of sustainability and continued affordability over the term

    Child tax credits

    100%
    Subject to sustainability over the term

    HMRC tax credit award letter (all pages) or, if award letter not available, 3 months’ bank statements clearly identifying the source of the income as being an acceptable benefit.

    Care: assessment required of sustainability and continued affordability over the term

    Child benefit

    100% (but where any applicant’s total gross income is above £50,000 and/or the child is over 13, child benefit should not be included as a source of income)

    DWP child benefit letter or, if letter not available, 1 month’s bank statement clearly identifying CHB.

    Care: assessment required of sustainability and continued affordability over the term

    Universal Credit

    100%
    Subject to sustainability over the term

    Jobcentre Plus letter confirming eligibility for Universal Credit and three month’s bank statements clearly identifying receipt of Universal Credit payments

    Note: Income evidenced as being received in the form of Universal Credit payments for an applicant can only be considered where there is clear evidence of receipt of another form of allowable gross income for that applicant

    Discretionary mortgage subsidies and housing allowance

    100%
    Subject to sustainability over the term

    Restricted term subsidies may be considered as a secondary income subject to a minimum term of 5 years: Contract of employment

    Care: assessment required of sustainability and continued affordability over the term

    Pensions and annuities (currently receiving)

    100%

    Pension payslip showing the applicant’s address and latest bank statement or

    Latest 3 months’ bank statements together with either:

    a) Pension statement
    b) Annuity/pension letter
    c) Latest Pension P60

    Pension statements and annuity letters may not be handwritten or amended and must:

    • Show applicant’s name and address, which must match that stated on the application form
    • Show pension/annuity company’s name, address, telephone number and company’s registration
    • number (if limited) and be on headed paper or show company stamp
    • Show pay dates
    • Cover at least one month (5 consecutive weeks)
    • Show gross income
    • Show net pay

    Pension statements (private/company/state) must:

    • Show regularity of payment
    • Not be older than 12 months

    Annuity letters must

    • Show lump sum invested in fund
    • Show amount payable monthly
    • Show end date if applicable
    • Not be older than 12 months

    Pensions (not yet receiving) when considering age restruction policy exceptions

    100%

    Statements from the organisation providing the pension confirming both the projected pension income and the assumed normal retirement date or FCA regulated letter from the Scheme Administrator

    Disability state benefits
    As listed in the Disability Discrimination Act 2005

    Disability Living Allowance, Attendance Allowance, Income Support, Council Tax Benefit, Invalid Care Allowance, Disability Working Allowance, Incapacity Benefit, Industrial Injuries Disablement Benefits

    100%
    Subject to sustainability over the term and overall level of reliance.

    Latest DWP Benefits Statement and 3 months’ bank statements clearly identifying the source of the income

    Care: assess sustainability of income source during full term of the mortgage and level of reliance on state or other benefits

    Permanent Income Protection Payments

    100% (received net of tax and should be treated as such in assessing affordability “Grossing-up” calculations may be conducted to ascertain an equivalent loan to income multiple to be used in the assessment).

    Policy statement clearly laying out pay-out schedule and amounts.

    Care – assessment required of sustainability and continued affordability over the term.

    1. ‘Bonus’ income evidenced as being paid monthly as non-discretionary pay, effectively as a regular commission, can be considered when assessing affordability. For residential mortgages, annual bonus income can only be utilised where the applicant is not debt consolidating.

    2. We can consider applications where your additional income in the form of bonuses, commission and overtime totals more than 100% of your basic annual income. Just make sure the total used when assessing allowable income and affordability isn't more than 100% of your basic income used. We can consider annual bonuses for affordability, but these will be subject to a 50% cut, as they're NOT capped in line with salary. When we’re working out your income multiples, 100% of your annual bonuses can be used towards this and they will NOT be capped in line with salary.

  • Armed forces personnel

    UK Armed Forces Personnel who are currently working in the UK or overseas and wish to buy/re-mortgage a property to let, that is intended to be their main residence in the future or on their eventual return to the UK. It is acceptable to let the mortgage property on an Assured Shorthold Tenancy basis.

    Service Personnel may be offered a Forces Help To Buy Loan (FHTB), which replaces the Long Service Advance of Pay (LSAP). This is usually a 10-year interest-free loan of up to £25,000. This may be used as a deposit to purchase a property but should be treated as a loan commitment in the normal way, with the annual monthly payments being deducted from the applicant’s income.

    Please see the Help to Buy – Forces Help to Buy policy section for further details.

  • Automated valuation model (AVM)

    For remortgages and purchases on properties up to £1m in value (up to £2m in London and South East), where the loan to value required is 80% (subject to product availability) or less, we use AVMs to assist with instant mortgage decisions. Whether you apply through MAX or via other online systems*, the use of AVMs will help speed up the decision and offer a better process for your customer.

    AVMs are only suitable for further borrowing where the latest valuation was a physical one – ienot an AVM.

    In all further borrowing cases where the latest valuation was an AVM, a Non-Disclosed PRA valuation must be requested.

    * For example, via MTE or Trigold.

  • Borrower numbers and types

    The maximum number of borrowers allowable is 4. Where there are 3 or more applicants, the Barclays Group will use only the 2 highest incomes when applying income multiples and assessing affordability.

    Where there are 3 or more applicants, Lending Standards rules will return a “refer” decision for underwriting review.

    Only 2 borrowers are allowed for Openplan Offset Mortgages.

  • Client IDV

    You will need to confirm the identity and verify the address of each customer, before you submit an application. If you are interviewing the client face-to-face and they are new to Barclays you will need to obtain one form of personal identity and one form of address verification. If you do not meet them face-to-face, you will need to obtain one form of personal identity, one form of address verification plus one further supporting item. You must review and certify the documents, we do not allow 3rd party certification e.g. Post Office. We do however accept documents certified by Barclays branch staff.

    System Requirements:

    For MAX (this is Mortgage Application Xpress, our online mortgage application tool) applications please record full details of the personal and address identification documents in the 'Solution Completion' section – there is no need to send copies of the documents to us, although you should retain copies as we may on occasion ask for copies to be submitted to us.

    For other online submissions* that are supported by a Certificate of Introduction details of the personal and address identification documents seen will be recorded on the certificate. Please refer to the Applications & Forms section on our website to get a Certificate of Introduction. Again, there is no need to send copies of the documents but don’t forget to retain copies on your file just in case we request them for audit purposes.

    * For example via MTE, Trigold etc.

    General Notes:

    • No document can be used as two forms of identification i.e. as proof of ID AND address.
    • Documents in alternate name must be supported by evidence of a name change e.g. marriage certificate, deed poll document, civil partnership registration
    • Address details must relate to the current residence. 
    • Your customer’s full first name and surname (as a minimum) must be on either the identification or address verification document. The 2nd document must, as a minimum, show their first initial and surname.

    Unacceptable documents:

    The following documents are not acceptable as proof of identity or address verification:

    • Expired documents and documents outside the specified timeframes
    • Immigration documents and travel documents – these are not a suitable substitute for a valid passport
    • Mobile phone bills
    • A print out of latest transactions from the client’s bank is not acceptable as an alternate to a bank statement
    • Any passport or ID card without a Machine Readable Zone (MRZ)

    The lists below provide the most commonly used items for proof of ID and address, if you hold alternative documentation please contact the Intermediary Support Team via web chat or call 0345 073 3330 for guidance about other acceptable documents or with any queries about the criteria.

    Proof of identity:

    • Full signed UK Passport with a Machine Readable Zone (MRZ)
    • UK Full Photo Driving Licence – A paper counterpart is not acceptable
    • UK Full Paper Driving Licence – Old Style
    • UK Provisional Photo Driving Licence 
    • Full signed Foreign Passport with a Machine Readable Zone (MRZ)
    • EU/EEA Full Photo Driving Licence Inc. Switzerland
    • EU/EEA National ID Card (Photo style) Inc. Switzerland with a Machine Readable Zone (MRZ) – incorporating signature and photograph.
    • Northern Ireland Voters Card will be considered for applications originated in Northern Ireland where the applicant is unable to provide any other form of acceptable proof of identity.

    Address verification:

    • UK Full Paper Driving Licence – Old Style
    • UK Full Photo Driving Licence - A paper counterpart is not acceptable
    • UK Provisional Photo Driving Licence
    • EU/EEA Full Photo Driving Licence Inc. Switzerland
    • UK Bank Statement of Account or Charges from UK Financial Institution (personal not business)- must be less than 3 months old
    • UK Credit Card statement (personal not business) - If the full card number is not on the statement, a photocopy of the actual card must also be taken. Must be less than 3 months old
    • Latest itemised UK mortgage statement - must be less than 12 months old
    • Letter or bill from Utility company - must be less than 3 months old. Addressed to the same property to which the utility service is provided. Utility Warehouse bills are not acceptable
    • Latest Council Tax Bill - must be less than 12 months old, and be addressed to AND relate to the same property
    • Letter from HM Revenue and Customs - must be less than 12 months old. HMRC Letters issued with the sole purpose of confirming a National Insurance Number, P45, P60 and P91T not acceptable
    • Government Benefits Entitlement Letters – must be less than 12 months old
    • Local Authority or Housing Association Current Tenancy Agreement - incorporating applicants name and address (tenancy agreement from private landlord not acceptable)
    • Postal Re-Direct Notification – issued by Royal Mail to current address and less than 3 months old

    NEW: Address verification – documents the customer has printed from the relevant secure internet site.

    • UK Bank Statements
    • UK Credit Card Statements
    • Utility Bills (Gas, Electric and Water – but excluding mobile phones)

    These can only be accepted alongside the following ID documents:

    • UK/EU/EEA/Foreign Passport; or
    • EU/EEA Issued National Photo ID Card; or
    • UK/EU/EEA Full Photo Card Driving Licence; or
    • UK Provisional Photo Card Driving Licence

    The name and address on the above ID document MUST match the name and address on the internet printed address verification document. If the customer does not have the above ID available or if the name and address do not match – you CANNOT accept prints from the internet.

    We can only issue a mortgage offer once all proof of identity and address requirements have been successfully completed for all clients

  • Commitments

      The monthly amount to be paid towards the following commitments (including those originated and/or operated outside of the UK) must be deducted from the applicant/s net income to prove affordability:

    • Hire Purchase Agreements including Mail Order Payments, Bank Loans, Finance Loans, Payday Loan Advances (full amount outstanding applies) or Second Charges
    • Future Commitments - commitments that become due during the term of the mortgage must be included in the affordability assessment. This includes deferred credit payments and delayed payments and should be entered in the 'deferred credit' dropdown box on the financial commitments page on the mortgage application system
    • In addition to being included in the Special Scheme information in Borrowing Requirements, all Shared Equity loan balances, including England & Wales Help to Buy Equity loans, must be recorded within Financial Commitments under 'Shared Equity' if interest is due within the mortgage term. The system will then take 3% per annum of the outstanding balance of the loan as a commitment for affordability. Please note: only in circumstances where no interest is due on the shared equity loan at any stage within the mortgage term (such as the Scotland HTB equity scheme) or the equity loan is being paid off in full as part of the application, should the equity loan not be recorded as a Financial Commitment If repaying part of an interest charging equity loan, these should be input as two Shared Equity commitments – one for the Shared Equity loan balance to be repaid (marked ‘to be repaid’) and one for the Shared Equity loan balance to remain (marked ‘not to be repaid’)
    • Second or subsequent properties: commitments in the form of mortgage payments on second properties, other than those on properties confirmed as Buy to Let or Permission to Let properties, should be applied on a standard repayment basis over the outstanding mortgage term at the current affordability rate or current payment amount, whichever is the higher when assessing affordability. Where a credit limit applies to the existing mortgage borrowing, then it is this figure, including any undrawn monies, that should be used when assessing affordability. For properties that are let, any shortfall between monthly rental income received and actual monthly mortgage payment should be included as a commitment.
      In addition, a fixed-value commitment for each additional mortgaged residential property held is applied by the system to cover all other costs – this only applies to other residential properties, ie, second residential homes, but not any property confirmed as being on a Buy to Let or Permission to Let basis.
      The running costs of any unencumbered second property need to be included in the affordability assessment – please manually enter figures on the Commitments screen. This should include
      • Gas and electricity
      • Water
      • House insurance
      • Council tax
      • Ground rent/service charge
    • Guarantors: If a customer is a guarantor for any mortgage, property rental agreement, secured loan or any other loans then the monthly payment of such commitments is applied in the affordability assessment in line with the above requirements
    • Regular Pension Payments – including any additional voluntary payments (such as AVCs) being paid regularly from income. One-off contributions – for example from an annual bonus – can be disregarded (pension contributions will be calculated automatically as part of the affordability assessment. They shouldn’t be input as part of the application process)
    • The cost of any bridging loan
    • Court orders relating to maintenance payments or judgement debts
    • Child Support Agency (CSA) payments
    • School fees and child care costs
    • Current monthly student loan payment
    • Liability for ground rent, service and maintenance charges under any leasehold, commonhold or other agreement – including any equity sharing agreements
    • Credit card debts (at the rate of 3% of the debt outstanding) including store cards
    • Overdraft debts (at the rate of 3% of the drawn balance at the time of application)
    • Council tax
    • Shared equity loan or shared ownership rent

    Other considerations

    • Any loan/fixed repayment debt with less than 6 months to run can be ignored, provided that the total balance of loans in this category does not exceed £1,000
    • The total amount outstanding against any ‘payday’ loan advance must be deducted from the applicant’s net income when assessing affordability
    • Any commitment which is to be repaid from the new proposed mortgage advance can be ignored provided a specific offer condition is made to this effect
    • Any unpaid tax evidenced from the HMRC tax overview document must be treated as a commitment in the period it falls due

    Notes: If any undeclared commitment is identified this will generate a remodelling of the application and potentially a change in lending decision.

  • Contract workers

    Our policy on applicants who are contractors depends on if they are working on an employed or self-employed basis.

    In all cases, however, we will require the applicant to have an established 3-year track record of employment within the same line of work and to have been contracting for a minimum of 1 year either on an employed or self-employed basis.

    If applicants choose to manage their own tax by setting up a limited company or contract on a self-employed basis then they should be considered to be self-employed. Please see our self-employed section for further details.

    If they are paid via an umbrella company who pays tax and National Insurance for the applicant (effectively they become a PAYE employee) then we would need to see their income evidenced by P60/HMRC Annual Tax Year Overview, payslips and bank statements.