buy to let criteria guide - aldermore · 2020-06-19 · buy to let criteria guide loan exposure...

18 September 2020

FOR INTERMEDIARY USE ONLY

Buy to let criteria guide

ARM571-0920-599860

Aldermore Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register number: 204503). Registered Office: 1st Floor, Block B, Western House, Lynch Wood, Peterborough, PE2 6FZ. Registered in England with Company No. 947662. Invoice Finance, Commercial Mortgages, Property Development, Buy to let Mortgages and Asset Finance lending to limited companies are not regulated by the Financial Conduct Authority or Prudential Regulation Authority. Asset Finance lending where an exemption within the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 applies, is exempt from regulation by the Financial Conduct Authority or Prudential Regulation Authority.


What’s changed?

We’ve reviewed our buy to let lending criteria and the types of business that we’re currently able to accept as a result of the impact of COVID-19.We’ll continue to update our criteria guide in response to new government measures and any changes we need to make to the way we work with you.

Buy to let mortgage guideRead the full guide

COVID-19 Q&A’s

0333 321 1000 intermediaries.aldermore.co.uk

Contact usWe’ve set up some new email addresses as our telephone lines are exceptionally busy at the moment. We’re also keeping our website updated with our current SLAs so you know how quickly we’re dealing with your requests.

Existing business submitted through our residential portal [email protected]

Existing buy to let business submitted through our commercial portal [email protected]

New business enquiry [email protected]

Product switch [email protected]

https://intermediaries.aldermore.co.uk/

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https://intermediaries.aldermore.co.uk/media/1070/buy-to-let-product-guide.pdf

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Loan

Purpose Purchase or remortgage of residential investment property

Applicant type Property type

Individual (including Sole Traders)orCorporate Body (Limited Companies, Partnerships and Limited Liability Partnerships)

• Single residential investment properties• Up to 6 flats in a block

Legal Representation We can use the applicant’s solicitors to act when they are on Aldermore’s solicitor panel

Purchase Property must have previously been owned by the seller for a minimum of 6 months

Remortgage Remortgage with additional borrowing not considered when for:• Payment of overdue income/corporation tax• Repayment of debts that haven’t been satisfactorily maintained• Capital raising for business purposes• For cash purchase more than 6 months• Let to buy purpose

Property must have been owned for at least 6 months.

Inherited property owned for less than 6 months

• Capital raise to pay off existing mortgage - maximum loan is the amount required to redeem any existing mortgage plus any documented essential improvement costs• Capital raise to pay off other beneficiaries - maximum loan is based on the evidenced equity share due

For all other applications the property must have been owned for at least 6 months

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Loan

Minimum Loan £25,000

Repayment type • Capital and interest repayment• Interest only

Minimum Term 6 years

Maximum Term 40 years

LTV & Loan Amount - Standard

Maximum LTV (%) Maximum Loan Amount (£)

80% £500,000

75% £1,000,000

LTV & Loan Amount - Other Limits

Up to 75% LTV Up to 70% LTV

£500,000 • First Time Landlord• New Build Flat (See section on New Build Flats)

£500,000 • New Build Flat (First Time Landlord)

£1m Remortgage for: • bridging finance after 6 months;• debt consolidation; • transfer of equity/buy out

£1m • New Build Flat (Experienced Landlord)

£5m • Residential investment portfolio (i.e. single loan application on multiple properties)• Up to 6 flats in a block (See section on Exposure Limits)

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Loan

Exposure Limits Exposure limits applied when lending on multiple properties in the same block, street, or full postcode. N.B. the number of properties owned by applicant(s) refers to the total number of properties they will have on completion with Aldermore

Less than 40% Exposure

No. of properties owned by applicant(s) Max Total LTV (%) Market Value

1 80%

2 - 5 75%

6 - 10 75%

11 - 16 70%

Over 16 65%

More than 40% Exposure (Lending based on the lower LTV)

No. of properties owned by applicant(s) Max Total LTV (%) Market Value Max Total LTV (%) Single Investment Value

2 - 5 75% N/A

6 - 10 70% 75%

11 - 16 65% 70%

Over 16 60% 65%

Addition of fees Maximum LTV excluding fees is 80%Maximum LTV including fees is 82.5%

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Loan

Deposit Applicant’s own fundsEvidence requiredIf from equity being raised on other property a copy ESIS document is required

Gifted DepositFull or part deposit as a non-repayable gift from a spouse, parent, child, grandparent, brother, sister, uncle/aunt, foster parent or legal guardian and includes step relatives

Builder Gifted DepositAcceptable up to 5%* of the purchase price (*includes all acceptable sales incentives)

Builder Part ExchangeEquity from the sale of existing property to a builder

Other acceptable sales Incentives provided by housebuilder

Legal costs and stamp duty, white goods, flooring, curtains/blinds and the upgrade of kitchen/bathroom

Maximum Value of 5%* of the purchase price (*includes builder gifted deposit)

Consumer Buy to Let Acceptable

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Non-portfolio Landlords

Assessment of the Portfolio The following documents are required:

Up to 10 mortgaged BTL properties with Aldermore• Portfolio schedule• Business plan

Portfolio Landlords (have 4 or more mortgaged BTLs in total)

Assessment of the Portfolio The following documents are required:

Up to 10 mortgaged BTL properties with Aldermore• Portfolio schedule • Business Plan

11 or more mortgaged BTL properties with Aldermore• Portfolio schedule • Business Plan• Cashflow Statement (for 12 month period)• Statement of assets and liabilities

Portfolio Affordability Minimum interest cover ratio (ICR)Stress Rate

Single residential investment properties HMOs

Individual name 145% 185%5.0%

Company name 125% 155%

Client Contact • Telephone contact or• Face-to-face contact when total borrowing with Aldermore is over £2m or more than 10 properties

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Applicant

Applicant Type Individuals

Sole traders

Registered and/or based in the United Kingdom, the Isle of Man or the Channel Islands Partnerships

Limited Liability Partnerships (LLP)

Private Limited Companies (Ltd)

Applications from corporate entities must include any directors/members with a shareholding of 25% or more

Maximum number of applicants

Applicants Applicant type Property Type

2 Individuals Single residential units

6 Individuals (3+) Sole TradersPartnershipsLimited Liability Partnerships (LLP)Limited companies (Ltd)

Single residential investment propertiesUp to 6 flats in a block

Minimum Age (at application)

21 (25 for First Time Landlord)

Maximum age (at end of term)

85

Residency Status • Continuously resident in the UK for the last 2 years• Non-UK/EU nationals acceptable if they have a non-conditional and permanent right to reside• For applications from limited companies a controlling interest in the company should be held by UK based directors

Power Of Attorney Not acceptable

Lending into retirement Additional affordability assessment if the term takes the applicant beyond their planned retirement age or age 70, and personal income is used

Personal Guarantees For applications from limited companies, personal guarantees from UK based shareholders/directors, who have a shareholding of 25% or more are required

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Applicant

First Time Landlord Key Requirements:

Maximum Loan £500,000

Maximum LTV 75%70% (new-build flats)

Minimum Age 25

Minimum Income £25,000

Residency Requirements Must have been an owner occupier for 12 months

Property Type Single dwelling residential security only

Additional Requirements:

• Where both applicants are first time landlords, one of the applicants must meet the key criteria• A minimum of 6 months is required following a completed application for a first time landlord before a subsequent application can be submitted

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Income and Affordability

General requirements Minimum ICR affordability is based on:

(i) Gross rental income; or(ii) Gross rental income to the lower cover limits, plus surplus personal income to top up to the higher limits

Minimum interest cover ratio (ICR)

Single residential investment property

Applicant type Minimum ICR Use of surplus personal income

Individual- higher or additional rate tax payer

145%

Minimum ICR using surplus personal income to meet shortfall is:

120%

Company or individual - basic rate tax payer*

125% 110%

Loans on capital repayment must meet interest only ICR requirements as well as the rental income alone being at least 100% of the stressed mortgage payment

* To be accepted as a basic rate tax payer the applicant’s total income (including all gross earned income, total gross monthly rental income, dividends and investment income) must not exceed £50,000

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Stressed interest rate Product type Stressed interest rate

Term variable rateHigher of (i) pay rate + 2% or (ii) 5.5%

Fixed rate less than 5 years

Fixed rate 5+ years Higher of (i) pay rate or (ii) reversion rate plus 0.75%

Minimum Income £25,000 for first time landlords

None for experienced landlords, although they are required to demonstrate they have sufficient income to cover their existing expenditure

Employed Applicants Requirements• The position must be permanent• Must be in the same line of work for at least three months prior to application

Evidence of income• Last month’s payslip prior to application (the year to date figure must cover 3 months); and• Latest P60 or March payslip if not available; and. Latest personal bank statement showing salary credit, plus rent payment for the subject property (if remortgage)

Self Employed Applicants Evidence of income

Last 2 years Tax Calculations and corresponding HMRC Tax Year Overview documents

If surplus personal income is required to meet affordability requirements applicants with 1 year’s accounts acceptable if they can:

• Evidence previous employment in the same line of work; or• Demonstrate guaranteed income for the next accounting period; or• Provide previous accounts/business valuation where the business is an ongoing concern; or• Provide management accounts for the first 6 months of the current year showing turnover is sustainable • Latest personal bank statement or statement showing rent payment for the subject property (if remortgage)

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Contract Employment Contractors

• Current contract must be for at least 6 months• If more than 6 months to run, applicant must have been employed for 12 months in the same line of work• If less than 6 months to run, applicant must have been employed for 24 months in the same line of work

Assessed as for self-employed unless contracted via an umbrella company that provides management services

Professional Sportspeople If employed on a contract applicants must have competed professionally for 24 months and the current contract must have at least 12 months left Additional income earned from endorsements is allowed

Income we will accept at 100%

Income from employment

• Basic salary (also for second jobs)• London or large city/town allowance• Shift allowance• Car allowance• Housing allowance (paid by the employer only)• Mortgage subsidy

Income from self-employment

Sole Trader:

Partner:

Limited Company Director:

Net Profit

Share of Net Profit

Directors Remuneration/SalaryPlus DividendPlus Share of Retained Profit

Other Income

• Income from trust funds• Occupational pension income• Guaranteed income under the Armed Forces Compensation Scheme• War widows or widowers pension• War disablement pension• State pension (not acceptable as the only source of income)• Investment income• Rental income, adjusted to reflect the estimated impact of future tax liability

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Income we will accept at 50% Income from employment

• Bank nursing (an average of the last 3 months will be used)

Benefit income

• Universal Credit• Working Tax Credits (WTC)• Child Tax Credit (CTC)• Income-related Employment & Support Allowance (ESA)• Contribution-based Employment & Support Allowance if in the ‘Support Group’• Incapacity Benefit• Severe Disability Allowance• Industrial Injuries Disablement Benefit (IIDB)• Disability Living Allowance (DLA)• Personal Independence Payment (PIP)• Carer’s Allowance• Constant Attendance Allowance

Other Income

• Maintenance Payments (if CMS/court order enforceable and supported by 6 months bank statements)• Foster Care Income (if supported by a track record of payment for at least 2 years prior to application, evidenced by Tax Calculations

Foreign Currency Income Not acceptable

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Credit Status

Acceptable Adverse Credit This refers to the maximum acceptable credit status within the stated term:

Mortgage or Secured Loan Arrears 0 in last 3 months1 in last 12 months2 in last 24 months

Unsecured Loan arrears 0 in last 3 months2 in last 24 months

County Court Judgements (CCJ) / Sheriff Court Decrees 0 recorded in last 36 months0 active in last 36 months over £500 (needs to be satisfied for 36 months if total combined value over £500)

Defaults 0 in last 12 monthsMax 1 in last 13-36 months up to £500 and settled

Communication Defaults All communication defaults are ignored

Pay Day Loans 0 in last 6 months

Individual or Corporate Voluntary Arrangement / Trust Deed / Debt Relief Order 0 in last 36 months

Bankruptcy / Sequestration 0 in last 6 years

Repossessions Forced or voluntarily repossessions are unacceptable

Corporate Gazette History No directorships with the following in the last 3 years;

• Creditors Voluntary or Compulsory Liquidation• Administration Orders • Winding up Orders

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Property

Use • Residential buy to let purposes onlyThe customer and/or a family member cannot live or intend to live in the property at any time

Location • The security must be in England (including the Isle of Wight), Wales (including Anglesey) or mainland Scotland only

Minimum property value • Single Residential Units: £60,000 Refer to ex-public sector section for additional information

Tenure • Freehold (heritable title in Scotland)• Leasehold• Absolute Ownership

Lease Term • 60 years unexpired at completion and 40 years at end of mortgage term

Please note: If the lease is shorter than 85 years at the start of the mortgage the valuation will be referred back to the valuer for additional comment on the impact of the property value

Core Criteria • The property must have dual demand for both owner occupier and investor markets• The property must have a minimum habitable floor area of 30 sqm• A property must meet the minimum criteria of being habitable, readily saleable, structurally sound and mortgageable

Buildings Insurance The property must have buildings insurance cover and this cover must be maintained at all times

Rental Assessment Based on an unfurnished single family dwelling

EPC requirements All BTL properties must have a valid energy performance certificate (EPC) or evidence that the property is exempt from requiring an EPC

Properties with an EPC rating of F or G or a lack of a valid certificate will mean that we will hold a £2,000 retention (valid for 6 months) until a suitable EPC is provided

(Not applicable in Scotland)

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Property

New Build Properties New build property is defined as any property being occupied and/or sold for the first time on the open market in its current state and includes converted and refurbished properties

New Build Flats Acceptable for experienced landlords. The LTV limits and maximum loan amounts are aggregated across all applications. Refer to the “LTV and Loan Amounts – Other Limits” section for full breakdown.

New Build warranties Properties built within the last ten years must hold an acceptable guarantee/certificate. Acceptable guarantees/certificates include:• Build Assure• Build Life Plans• Build Zone• Castle 10 (Checkmate)• Local Authority Building Control (LABC)• NHBC certificate• Premier Guarantee• ICW• Global Homes Warranties• Advantage• Protek• Capital Warranties• Q Assure• Aedis· One Guarantee· Ark Residential InsuranceProperties built using professional consultant monitoring can be considered subject to suitable qualifications, professional indemnity limits and development sizeNote: Consultant monitoring will only be acceptable on individual or small development schemes comprising no more than 15 units in total

Ex-public sector properties Ex-public sector houses are acceptable, subject to the following conditions:• No outstanding pre-emption requirement to repay a proportion of the discount• Valuer indicating that there is evidence of a meaningful level of private ownership within the estateFlats and maisonettes can be considered, subject to the following conditions:• Minimum property value of £100,000 (£200,000 in Greater London)• No outstanding pre-emption requirement to repay a proportion of the discount• Maximum of 3 floors above the ground floor• Secure communal access with no balcony access arrangements• Valuer indicating that there is evidence of a meaningful level of private ownership• The property being of standard construction

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Property

Unacceptable property types/scenarios

(Please note this list may not cover all property types, so if you have any questions about what we will lend on, please contact your BDM for more information)

The following properties/scenarios are not acceptable: • Part let or part possession• Commonhold properties• Properties located in the Channel Islands, the Scilly Isles or islands of Scotland• Ex-public sector flats with a minimum value below £100,000 (£200,000 in Greater London), Properties unfit for immediate habitation • Properties not wholly owned by the borrower, e.g. shared ownership• Freehold flats• Properties acquired under an assigned contract• Farms, smallholdings, crofting or properties with agricultural leases or restrictions in place• Properties where dual demand (owner occupier and investment) does not exist • Ex-public sector flats with balcony/deck access • Properties with rent charges, estate rent charges without notification clauses or where there are outstanding local authority grants payable• Live/work units• Properties with shared access where a relative of the applicant resides in the other property• Properties with high alumina cement levels• Pre-fabricated properties• 100% timber properties • Properties with cob walls• Large panel system properties • Pre-cast reinforced concrete (PRC) properties that have not been suitably repaired (certificate required) • Grade I or Scottish Grade A listed properties• Steel-framed houses constructed pre-1987 • Property constructed using concrete Large Panel Systems (LPS)• Where satisfactory tenant demand does not exist or the proposed security is considered unsuitable for private renting• Single residential investment property with more than two kitchens• Properties where the condition significantly affects marketability• Any property determined as unacceptable security by the appointed valuer

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Property

Unacceptable property types/scenarios

(Please note this list may not cover all property types, so if you have any questions about what we will lend on, please contact your BDM for more information)

• Property with the following restrictive covenants: - Property restricted to agriculture or equestrian use - Purchaser(s) must be living and/or working in a small geographical area (e.g. specific parish), which is not in the list of acceptable areas - Purchaser(s) must be in housing need - Purchaser(s) cannot afford to purchase on the open market - Purchaser(s) having income less than a certain amount - Property ownership restricted to specified age group e.g. retirement homes - Limit on mortgage payment as a proportion of income - Fixed capital values i.e. a property cannot be sold for more than the purchase price into perpetuity or a value cap is implemented• Wimpey No-Fines (if constructed prior to 1946 or bungalow or flat)• Laing Easiform construction (if constructed prior to 1966 or bungalow or flat)• Mobile Homes/ Houseboats



buy to let criteria guide - aldermore · 2020-06-19 · buy to let criteria guide loan exposure...

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