Residential | D-K
Lending criteria – residential
Applications for the purchase of residential properties that will be occupied by a dependant relative of the applicant are acceptable under lending standards. If the property being bought is being sold by a dependant relative who will then remain in the property after the sale takes place, the application must be declined.
Any dependant relative must be occupying the property rent-free.
Where a property is being purchased, applicants are expected to provide a deposit of at least 5%* of the purchase price
*The personal stake may vary depending on specialist schemes or circumstances where loan to value restrictions apply.
The applicants must declare the source and amount of their deposit on the application form. Usually, the deposit will be from the applicants’ own savings, the sale of their previous property, a gift from relatives or a combination of these sources.
It is not acceptable for applicants to resort to secondary borrowing to fund the deposit, for example, by raising a personal loan. The only exceptions to this rule are
- Where the applicant is raising a deposit from the equity in another property
For all purchase applications the applicant must provide documented proof of the source of the deposit.
- Where the applicant is raising a deposit from the equity in another property
Staff working in the UK for embassies, high commissions and international organisations (eg, United Nations) benefit from diplomatic immunity. Mortgage requests from applicants who have diplomatic immunity are outside of lending standards and should be declined.
Local Authorities, Housing Associations and private developers / house builders (as part of their affordable housing obligations) may offer properties for sale at a discount, where the discount is set as a percentage of open market value, for example 80%. This discount may apply in perpetuity; that is, for subsequent sales the owner can only sell the property at the same discount based on the open market value at that time.
The discount arrangement is usually under a ‘section 106’ restriction. Discounted market sales are acceptable provided this restriction does not apply to the lender who may sell the property at open market value.
Maximum 85% LTV based on the discounted sale price. Where there is a section 106 agreement, the LTV must not exceed 80% of the open market value (not the discounted sale price).
Where an applicant works for a “relative or partner”* who owns more than 20% of the company in which the applicant is employed by, we will treat them as employed, however we must take additional steps to confirm sustainability of income. The last 3 months payslips, corresponding bank statements and latest P60 must be provided. Where there is subsequently any concern with regards to sustainability of income required, underwriters should request trading accounts for the company for the last 2 years, or where employed by an LLP, a letter from the Finance Director/Senior Partner confirming income.
*”Relative or Partner” is defined as “The borrower’s spouse or civil partner; a person (whether or not of the opposite sex) whose relationship with the borrower has the characteristics of the relationship between husband and wife; or the borrower’s parent, brother, sister, child (including step child), grandparent or grandchild.
Employed applicants are required to have been employed by their current employer for 3 consecutive months prior to application or to have been in continuous employment with no gaps for the last 18 months.
The Family Springboard Mortgage is a product designed to allow family members and others to help a loved one get on, or up, the property ladder. Through it ‘helpers’ provide a 10% security deposit held in a ‘Helpful Start’ account and applicants are then able to purchase a property with no deposit or a personal deposit starting at just 5%. After 5 years the 10% contribution is released back to the helpers, with interest added (restrictions may apply), and the applicant continues with their mortgage.
- Applications to be submitted with a deposit from 0% to 9.99% (including any application fees)
- LTI at 4.0 times however, if applicants earn over £50,000 individually or collectively this will go up to 5.5 times
- Maximum loan amount of £500,000
- Maximum term of 35 years
- Applies to purchases only, but not restricted to first-time buyers
- Repayment type must be standard capital and interest, ie not interest-only
- Applicants can only be party to 1 Family Springboard Mortgage; however, there is no restriction to the number of Family Springboard mortgages that helpers can support
- Helpers must put 10% of the purchase price into a Helpful Start account. The deposit monies are to be held for a period of 5 years from mortgage completion subject to satisfactory mortgage payment history throughout that period
- A legal charge must be obtained over the Helpful Start account deposit monies before any mortgage monies are released and the deposit account must be frozen for the period required to support the mortgage. While the charge is in place the Helpful Start account is not covered by the Financial Services Compensation scheme
- The Helpful Start account holders must obtain Independent Legal Advice, to be evidenced by Mortgage Services prior to the release of any mortgage monies. The borrower and the Helper may have the same solicitor for the Independent Legal Advice (though this is dependent on the discretion of the solicitor’s firm)
- Family Springboard Mortgages are not available on new build properties. Such applications should be submitted under the NewBuy Scheme
- It is unacceptable for Family Springboard applications to be submitted where the property is to be let from the outset; this includes armed forces
- Family Springboard mortgages are not available under the Family Affordability Plan (Joint Borrower/Sole Proprietor policy)
- Family Springboard is not available for shared equity or shared ownership propositions
- No additional borrowing is allowed during the first 5 years or while the security deposit funds are being relied on to support
- Standard policy rules apply with regards to affordability, income multiples and adverse credit
An applicant cannot apply for a Family Springboard mortgage if they own a BTL property or have a second residential property, even if it is on a Permission to Let basis.
Mortgage applicants must be first-time buyers who haven’t previously held a mortgage in the UK or abroad. This applies to all applicants for a joint application.
Setting aside a big deposit for a new home can be a challenge. But with the government-backed Help to Buy scheme, customers with smaller deposits can qualify for loans on new-build homes of up to £600,000 in England.
How the scheme works
The government provides an equity loan through the Homes and Communities Agency of up to the limit for your region (15% in Scotland, 40% in London, 20% everywhere else) and we provide the rest. The equity loan will require an affordability assessment to be carried out by a local HomeBuy Agent.
Find out if your clients are eligible
- They’ll need a minimum 5% deposit. A part-exchange from an existing property isn’t allowed
- They’ll need to be a first-time buyer or existing homeowner moving to a new residence
- The property purchased must be their sole residence, and cannot be let out (even if they’re a member of the Armed Forces)
- The applicant, or any occupier, can't own a second property, even if it’s a Buy to Let or Permission to Let property
- Maximum 40 year term for the mortgage
- Income multiples are capped at 4.49 times income
- Their home must be built by a Help to Buy registered builder
- They must choose a mortgage from our Help to Buy product range, which is available on a repayment basis only
- They can’t port an existing mortgage onto the property. The Help to Buy mortgage must be taken for the entire mortgage amount
- Help to Buy: equity loan mortgage products are not portable
- Residency/Citizenship requirements – normal lending policy should be applied – see Residency
- Local Authority Shared Equity schemes, on similar terms to the Help to Buy Equity scheme, are acceptable but only where Barclays security is not compromised through any scheme restrictions. These will be based on the same lending criteria as the Help to Buy Equity Scheme
About the government equity loan
- The loan must be repaid in 40 years, or sooner if they sell the property
- The loan is interest-free for the first 5 years, followed by a fee of 1.75% in the sixth year, and rising annually by RPI plus 1%
- 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’)
- The following non-financial incentives are acceptable, but must be declared to the valuer on the CML ‘Disclosure of Incentives’ form so that they can properly be taken into account:
- White goods (where not included as standard specification)
- Floor coverings
- Integrated lighting (downlighters)
- Kitchen upgrade, including tiling and worktop
- Bathroom upgrade
- All electric upgrade – ie additional sockets, TV points, etc
- PV (photovoltaic) panels
- Any builder deposit/cash incentive, ie stamp duty, legal costs and estate agent fees, under this scheme must not exceed 5% of the purchase price. It is not acceptable for any builder cash incentive to be used as part of the 5% deposit which must be funded from the applicant’s own resources.
- There must be no restriction on sale of the property – this includes the existence of any S106 agreement
To find out more, just call the IBC at 0345 073 3330.
Re-mortgage from another lender
Customers who wish to re-mortgage their Help to Buy Equity Loan (England, Wales and Scotland) with Barclays can do so by selecting a suitable product from our standard product range. Note that any Barclays products that are branded as ‘Help to Buy Equity Loan’ are only available for Purchase.
Help to Buy equity loan re-mortgages can be accepted using the following criteria
- For like-for-like remortgages, we accept applications for up to 75% of the current market value of the property (80% for Scotland)
- If additional borrowing is requested to repay part of an equity loan or for other purposes, we accept applications for up to 85% of the current market value of the property (which includes the additional borrowing)
- Where additional borrowing is requested to repay all of an equity loan, we accept applications for up to 90% of the current market value of the property (including the additional borrowing)
- Additional borrowing can only be considered with HomeBuy Agency permission, who may require an equity loan to be repaid
Help to Buy (Scotland)
Help to Buy (Scotland) policy requirements are the same as that for the scheme applicable in England (above) except for:
- The Scottish government provides an equity loan of up to 15% of the property's value
- The maximum new-build property value is £200,000
- Available on properties in Scotland only
- There is no interest charge on the equity loan portion during the lifetime of the loan – it is interest-free – and as such it shouldn’t be included in any affordability assessment
Help to Buy (Wales)
Help to Buy (Wales) policy requirements are the same as those for the scheme in England (above) except for:
- The maximum new-build property value is £300,000
- Available on properties in Wales only
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 monthly payments being deducted from the applicant’s income.
The sourcing of the deposit in this way must be declared in the mortgage submission, and advisors or underwriters may ask the applicant to provide the ‘Personal Information Note’, which will contain details of their loan.
Note: Forces Help to Buy may be used as a deposit to help fund the purchase of a property under the Help to Buy: equity loan, but it cannot be used to help fund a deposit for buying a property through the Help to Buy: mortgage guarantee scheme.
Maximum Income Multiple
Income of > = £75k (or joint income > = £100k)
up to 85% LTV where loan is capital and interest
Income of > = £45k up to 85%
Income of > = £30k up to 80%
LTV greater than 90% and income < = £50k
Debt to income ratio* > = 20%
All other scenarios (unless stated below)**
*Debt to Income Ratio is calculated as existing monthly credit commitments/gross monthly income
The maximum borrowing amount is capped at either the affordability assessment, the income multiples cap or maximum loan to value – whichever is lowest.
**Different income multiples apply for:
- Family Springboard – a maximum multiple of 5.5x applies for incomes above £50,000.
- Help to Buy Schemes – a maximum multiple of 4.49x applies.
The maximum loan to value allowed on an interest-only basis is 75%. Where sale of property is used as the repayment vehicle, clients can borrow up to 75% LTV on residential mortgage, however this must be made up of a maximum 50% LTV in interest only. After the interest only element of the lending, customers are required to have £300K of equity in the property. The minimum loan size for new Interest Only applications is £200k (£200k in aggregate for Further Advances) however existing Barclays mortgage customers looking Rate Switch on a like-for-like basis the minimum loan size requirement will not apply.
The maximum term for an interest only mortgage is 25 years and cannot extend into retirement.
The maximum income multiple applicable to Interest only mortgages is 5.0x (please see the Income Multiples section of our Lending criteria for full policy details).
There is a minimum income criteria required to be eligible for interest-only borrowing (including part and part borrowing):
- Sole application – the applicant must have a gross income of at least £75,000
- Joint application – one applicant must have a gross income of at least £75,000
- Joint application – where no individual income is over £75,000, joint gross income must be at least £100,000
Income must meet lending standards requirements with regards allowable gross income types i.e. all allowable income types not including any annualised performance bonus paid at the discretion of any employer.
Given the importance of the minimum income criteria, and to protect your customers, please ensure that the minimum requirements are met – particularly where a customer is at the margins of income threshold.
Debt consolidation is not allowed for existing or new interest-only borrowing. The only exceptions to this being where an existing customer has a drawn mortgage reserve balance and wants to consolidate this, or where a customer wishes to add an ERC to the balance of the mortgage when remortgaging to us from a competitor.
The Barclays Group requires all customers who take an interest-only mortgage to have in place a repayment plan for their loan on completion of the advance. Unless using sale of property to be mortgaged, we require the repayment vehicle to have been in place for 12 months. The Barclays Group will consider one, or a combination of the following as acceptable repayment plans for interest only mortgages:
- An existing endowment policy
- An existing stocks & shares ISA
- An existing (minimum 12 months) share, unit, or investment trust (professionally managed)
- Sale of mortgaged property
Where your client wishes to use any other method of repayment to repay the interest-only amount other than the acceptable repayment plans detailed above, this is not acceptable. While it will be the customer’s responsibility to maintain the repayment strategy throughout the term of the mortgage, as a responsible lender, it is important for us to ensure all interest-only mortgages are supported by an acceptable repayment strategy which will be sufficient to cover the interest-only mortgage on maturity.
Part and Part Borrowing – where sale of property is to be used as the repayment strategy for interest only borrowing a Maximum LTV of 75% applies subject to any interest only borrowing not exceeding 50% LTV. In addition, at the outset, there must be a minimum of £300k equity (this includes any capital & interest borrowing) after accounting for any interest only lending amount E.g. £600K property (based on lower of valuation and purchase price); maximum interest only element is £300K (50%) with a maximum £150K on capital & interest repayment (total LTV 75% with £300K equity once the capital & interest element is repaid).
Transactions at Undervalue – eligibility must be based on the actual purchase price and not the property valuation
Existing interest only customers
Existing interest only customers wishing to borrow additional funds or port must meet the current lending standards relating to interest only. This includes meeting the minimum income threshold. Existing customers who do not meet current lending standards for interest only would need to switch their repayment type to capital and interest
We require a plausibility check to be done on all interest-only mortgages as per the assessment guidelines in the table below. This will determine if your client can borrow the required amount on an interest-only basis. Documentary evidence must be submitted with the mortgage application and will be checked as part of the underwriting process.
Existing endowment policy
Interest-only mortgage amount must not exceed the expected maturity value – must have been held for 12 months
Latest annual statement – the statement must have been issued no longer than 1 year previously
Maturity value assessment is undertaken by the online application system based on pre-determined market rates of return of 4.5%. The current asset value, maturity date and monthly premium details should be input into the online application system
Existing Stocks and Shares ISA; existing share, unit or investment trust (professionally managed)
Interest-only amount must not exceed the calculated maturity value – must have been held for 12 months
Latest statement – the statement must have been issued no longer than 1 year previously
(Current balance evidenced) + (current monthly investment x term of mortgage in months)* must be sufficient to cover the interest-only mortgage amount on maturity – potential growth must not be included
Sale of mortgaged property
For residential mortgage a maximum LTV of 50% and minimum equity £300k applies (note clients can borrow up to 75% LTV where the sale of property is used but a maximum of 50% LTV can be taken on an interest-only basis)
We allow the use of internet bank statements as supporting documentation for assessment purposes given the following criteria:
Internet bank statements stamped and certified by issuing bank:
This confirms that they are a true reflection of transactions and can be accepted.
Internet bank statements NOT stamped and certified by issuing bank:
If the internet bank statements have not been stamped and certified by the issuing bank the following steps must be followed:
- 1 month's internet bank statement and corresponding payslip must be submitted in all cases. These are to be certified as true copies in the normal way
- The statements must show the account number and sort code with the full first and surname of the applicant(s). It is acceptable for middle names to be present as initials
If the customer's first and surname are not on the statement, certified documentary evidence demonstrating the customer connection to the account is also required. This can be in the form of:
- Correspondence from the accounting holding bank showing full name, address and account number
- Copy of a cheque evidencing the full name and account number
- The corresponding payslip that evidences the salary mandated to the account must show the customer's full name
- P60 where the full name can be aligned to the payslips through the National Insurance number, which in turn can be connected to the bank statements provided
Statements can be in no way edited and all debit/credit entries and running balances must be visible.
Japanese Knotweed is an invasive plant introduced into the UK and has no natural predators. The plant is known to exploit existing weaknesses in buildings. Applications where Japanese Knotweed is identified should be looked at in accordance with the following requirements:
Japanese Knotweed is within 7 metres of the main building, habitable spaces, conservatory and/or garage and any permanent outbuilding, either within the curtilage of the property or on neighbouring land;
Japanese Knotweed is causing serious damage to permanent outbuildings, associated structures, drains, paths, boundary walls and fences.
To be reported in the valuation report together with a valuation of the property. Further investigation is required. This is to be undertaken by a Property Care Association (PCA) registered or similarly qualified firm. All recommended remedial works must be covered by an insurance backed guarantee. The guarantee must be for a minimum of 10 years, be property specific and transferable to subsequent owners and any Mortgagee in Possession.
An insurance backed treatment plan must be confirmed prior to completion. It is not necessary for the recommended remedial works to be completed prior to the release of any mortgage monies.
Japanese Knotweed is present within the curtilage, but is more than 7 metres from the main building, habitable spaces, conservatory and/or garage and any permanent outbuilding.
Report this in the valuation together with a valuation of the property. No further investigation or action is required.
There is damage to outbuildings, associated structures, paths and boundary walls and fences and this is considered minor.
Report this in the valuation together with a valuation of the property. Further investigation is required. This is to be undertaken by a Property Care Association (PCA) registered firm. All recommended remedial works must be covered by an insurance-backed guarantee. The guarantee must be for a minimum of 10 years, be property specific and transferable to subsequent owners and any mortgage in possession.
An insurance-backed treatment plan must be confirmed prior to completion. It is not necessary for the recommended remedial works to be completed prior to the release of any mortgage monies.
Japanese Knotweed is not seen within the boundaries of the property, but it is seen on a neighbouring property or land. It is within 7 metres of the curtilage of the subject property, but more than 7 metres away from the main building, habitable spaces, conservatory and/or garage and any permanent outbuilding.
To be reported in the valuation report together with a valuation of the property. No further investigation or action required.
Japanese Knotweed is not seen at the property, but it can be seen on neighbouring property or land where it is more than 7 metres away from the curtilage of the subject property.
To be reported in the valuation report together with a valuation of the property. No further investigation or action required
- Available in England, Wales, Scotland and Northern Ireland
- All proprietors must also be borrowers
- All non-proprietor borrowers who live (or will live) in the mortgaged property must sign an occupancy form
- All non-proprietors must take independent legal advice that is evidenced by a solicitor's letter
- Where the proprietor has an existing residential property that isn't being sold, the maximum LTV is 80% (residential only)
- All other standard LTV limits apply
- All borrowers must sign the property's mortgage deeds
- Not available on our Family Springboard, Right to Buy, First Home Fund or Help to Buy schemes
This facility is available for Barclays Residential Mortgages and Openplan Offset products, available via all channels. In cases where this arrangement is required, the following must be adhered to:
- The applicants must clearly state the requirement for this arrangement and the name of the sole property owner on the application form in the ’Additional information‘ section
- The borrower who is not named on the Title should sign an occupancy form if living in the property
- All borrowers must sign the Mortgage Deed
- It is mandatory that any borrower/s not named on the Title to the property obtain independent legal advice. This is to be confirmed to Mortgage Services by the solicitor providing the advice by returning our standard ILA documentation before any completion monies are released
- Joint Borrower/Sole Proprietor is not available with Help to Buy
This arrangement can only be made where one of the joint borrowers is not also going to be a legal estate holder, ie will not be on the title deeds. Under no circumstances can a mortgage be agreed where any party named on the title deeds is not also going to be a mortgage borrower.
All other elements of Standard Lending Policy are to apply.
- If the non-proprietor has any existing residential mortgage commitments (ie not BTL/PLT) these must be taken into account in the affordability assessment. Calculations should be made on a standard repayment basis over the remaining mortgage term at the current pay rate or stressed rate, whichever is higher
- Products under the NewBuy scheme allowing the maximum LTV to be increased to 95% on new build purchases in England for specific participating builders are available under this borrowing structure for the purchase of principal residence of named occupier/s
For intermediary use only