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Lending criteria

Section Page Acceptable intermediaries 2 Additional secured borrowing 2 Administration fees 2 Adverse / impaired credit 2 Affordability / income requirements 3 Buy to Let 4 Construction 5 Credit checks 5 Deposits 6 Employment 7 Ex-Council / local authority properties 7 Flats 7 Higher Lending Charge (HLC) 7 Income verification 8 Interest only 10 Lender / Landlord references 10 Lending in/ into retirement 10 Loan to Value (LTV) 11 Mortgage term 11 Own insurance charge 11 Procuration fee 12 Property 12 Property location 13 Recent construction 13 Remortgage legal fees incentive 14 Right to Buy 14 Society postcode operating area 14 Solicitors 14 Standard valuation fees 14 Tenure 15 Verification of identity 15

This lending criteria is for the use of mortgage intermediaries and other professionals only. People who do not have professional experience of mortgage products should not rely on this lending criteria. This is not a financial promotion and should not be displayed as such.

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Acceptable intermediaries

Intermediaries that are appropriately authorised by the FCA or are an Appointed Representative of an authorised firm. Intermediaries will be required to register online and will be verified.

Additional secured borrowing

Additional secured borrowing is offered as further advances. This service is available on products which are available at the time of request and is subject to normal lending criteria. A further advance administration fee of £200.00 is payable. Please note that no procuration fee is payable on further advance applications.

A re-valuation will be required when the new total loan exceeds 60% of the recorded valuation.

Administration fees

A list of the Society's mortgage administration fees can be viewed by clicking here.

Adverse / impaired credit

Where a credit check reveals a less than satisfactory credit history the case will be declined.

CCJs outstanding Not accepted

CCJs settled

Applicant’s with one or more CCJ’s within the last three years with a value greater than £500 will not be accepted.

Defaults

Not accepted whilst unsettled. Settlement evidence will be required. Applicant’s with one or more defaults within the last three years with a value greater than £500 will not be accepted.

Arrears/ Late Payments

Applicants will not be accepted where their cumulative payment shortfall at any point reached three or more monthly payments within the last two years.

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Bankruptcy

A discharged bankrupt person will be considered providing evidence shows the discharge occurred a minimum of three years ago. Chief Executive approval required. Max 70% LTV.

IVAs

A discharged IVA person will be considered providing evidence shows the discharge occurred a minimum of three years ago. Chief Executive approval required. Max 70% LTV

Previous Repossession

Applicants who have previously had a property repossessed may be accepted subject to the repossession having taken place more than 5 years ago, maximum LTV 70% & clear credit history since the repossession. Head of Underwriting approval required.

Debt Management Plans Considered, providing evidence shows completed 3 years ago.

Affordability / income requirements

We will require 3 months bank statements which will be reviewed and we will use this information to work out how much an applicant has left at the end of the month after their expenses (including the stressed mortgage payment). To meet our affordability criteria, the amount at the end of the month i.e. the monthly surplus must be greater than £0.

We all know that interest rates can go up and down. We want to make sure that our borrowers can still afford their monthly repayments if interest rates do go up. Therefore the mortgage payment we use in our affordability calculations is based upon our standard variable rate + 1.1%. This is to ensure the mortgage is still affordable taking into account the impact if interest rates were to rise in line with market expectations over the next five years. We also assume the repayment method is 'capital and interest'.

Where the amount to be borrowed is not known or the applicant does not have all the information to hand to allow a full breakdown of their monthly income / expenditure, income multiples may be used as a guide to affordability. Our basic guidelines for income multiples are; 4.5 x Joint.

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The following financial commitments must be deducted from the basic income before applying the multiplier;

Hire purchase

12 x monthly payments deducted from the gross annual income. 1 x monthly payment used in the net monthly expenses.

Personal loans

12 x monthly payments deducted from the gross annual income. 1 x monthly payment used in the net monthly expenses.

Overdraft

3% of the outstanding balance x 1 for net monthly payment. Net monthly payment x 12 to be deducted from the gross annual income.

Credit/Store cards

3% of the outstanding balance x 1 for net monthly payment. Net monthly payment x 12 to be deducted from the gross annual income.

Child maintenance

12 x monthly payments deducted from the gross annual income. 1 x monthly payment used in the net monthly expenses.

Buy to Let

The property must be able to achieve a minimum interest cover ratio (ICR) of 145%. We will accept personal income to support their BTL application where the ICR is less than 145% but greater than 130%. A full affordability assessment must be undertaken. The interest rate used for stress testing the ICR will be the higher of the pay rate +2% or 5.5%. The tenancy must be by way of an Assured Shorthold Tenancy for a minimum term of 6 months. The maximum number of buy to let properties with us or any other lender is 3. Not available on current local authority or ex-local authority homes. LTVs are product specific up to a maximum 70%.

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Builder Incentives

Cashbacks

Yes

Stamp Duty

Yes

Legal Fees

Yes

Valuers Fees

Yes

Fixtures & Fittings

Yes

Moving Costs

Yes

Non-financial / In-kind Incentives (e.g. white goods/kitchen appliances,

furniture/furnishing)

Yes

Construction

Traditional construction types are generally accepted, that is:

Walls - brick, render or stone, cavity or solid.

Roofs - pitched with either tile or slate covering.

The following non-traditional construction types are NOT acceptable to the Society:

Prefabricated Reinforced Concrete

Large Panel Systems

Steel Framed / Steel Clad

Timber (Properties constructed entirely of timber are not accepted by the Society. However, modern timber framed properties are generally accepted by the Society).

Flat Roofed (Such properties are generally not accepted by the Society. However, such properties that have a pitched roof covered with mineral felt may be acceptable to the Society.)

Credit checks

All applications will be subject to credit checks on the applicants' addresses to cover the previous three years. Self-employed applicants will be checked under both their personal name and also their trading name.

If there is no record of residency, explanations and proof of residency for the previous three years will be required.

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The Society does not operate a system of credit scoring. Applicants are credit checked using Equifax and all applications receive the individual personal consideration of an underwriter.

Deposits

Builder Gifted Deposits Subject to confirmation by valuer

Family Gifted Deposits

Yes

Concessionary Purchase (Family) (please state if you require the applicant to put down their own personal deposit, or can you use the gifted equity as the whole deposit)

Yes

Would you allow the family member selling the property to remain an occupier of said property post completion?

Yes subject to usual consent to mortgage form

Concessionary Purchase (Landlord) (please state if you require the applicant to put down their own personal deposit, or can you use the gifted equity as the whole deposit)

Yes subject to written confirmation

Concessionary Purchase (Employer) (please state if you require the applicant to put down their own personal deposit, or can you use the gifted equity as the whole deposit)

Yes subject to written confirmation

Concessionary Purchase (Vendor) (please state if you require the applicant to put down their own personal deposit, or can you use the gifted equity as the whole deposit)

Yes subject to written confirmation

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Employment

One year's employment history will be required and employment must have been with the current employer for at least six consecutive months and the applicant(s) must be a permanent member of staff.

Contract workers should be referred to the Society for further consideration.

Ex-Council / local authority properties

Properties must have a minimum value of £60,000 and subject to maximum LTV of 80%.

Flats

The Society will only consider applications for loans where the property is a purpose built leasehold flat or a property converted into leasehold flats. Where the block is more than 4 stories high, the case should be referred to the Society for further consideration.

Applications will not be taken on former local authority flats, houses used previously as a domestic dwelling now converted into flats, maisonettes or flats/apartments above a shop or other commercial premises.

Foreign Currency Lending

The Society will accept applications from individuals who are UK residents and paid in the following foreign currencies up to a maximum LTV of 75%;

· Euro · US Dollars · Australian Dollars · Chinese Yuan · Saudi Riyals · UAE Dirhams · Qatar Rials

Please note the income used for affordability purposes once converted in to sterling will be reduced by 20% for the Euro, US Dollars, Australian Dollars and 30% for the remaining currencies.

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Higher Lending Charge (HLC) (When Charged)

If the mortgage LTV is above 80% up to a maximum of 95% a HLC is applicable (subject to a maximum advance of £400,000). A £50.00 administration charge is also payable. The HLC is added to the loan on completion (providing the maximum LTV allowed under the product is not exceeded) and can be paid if the borrower wishes to do so.

From time to time the Society will pay the HLC on behalf of the borrower as a product incentive. Please check individual product details for further information.

LTV Base Premium %

IPT Premium including IPT

Maximum Advance

80.01 - 85% 3.75 10 4.125 £400,000

85.01 - 90% 4.75 10 5.225 £400,000

90.01 - 95% 6.20 10 6.820 £300,000

95.01 - 100.00%

10.00 10 11.000 £250,000

Income verification/ Affordability

The last 3 months bank statements will be required in all instances.

Employed (new loans 80% or less LTV):

The three most recent pay slips may be accepted, provided the year to date figure shown on the pay slip verifies the calculated income. (Where the pay slips do not verify the annual income, an employment reference will be sought independently of the applicant).

The net income shown on pay slips must be verified against the information shown on recent bank statements.

Income

Guaranteed income

100% if guaranteed. Subject to confirmation on last 3 pay slips + P60 and/or employment reference as confirmation.

Regular income

Under 80% LTV- 100% subject to confirmation on last 3 pay slips + P60 and/or employment reference as confirmation. Above 80% LTV – Confirmation of the last 3 years income will be sought. Providing the variation does not exceed 25% year on year an average may be used. Should it exceed 25% the lowest figure will be used.

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Self-Employed (Non limited companies)

Average of the drawings or net profit achieved in the last 3 years and on the assumption that income figures indicate gradual improvement year on year. Where income is not showing a trend towards improvement or where a large variation occurs between sets of annual accounts (more than 25% from one year to the next), a lower figure typically 80% of the average will be used.

Bonus/ Commission (please indicate if you accept quarterly/ annual bonuses)

Yes if guaranteed

Overtime Yes if guaranteed

Car Allowance Yes if guaranteed

Location/ Cost of Living Allowance (e.g. London Weighting)

Yes if guaranteed

Maintenance (if yes, does it need to be Court Ordered or CSA)

Yes - Court Order required

Maternity Pay Yes

Foster Carers Income Yes

Bursary Individual Circumstances reviewed

Scholarships/ Grants Individual Circumstances reviewed

Rental Income Yes – 50% of gross rental

Probationary Periods No

Length of Time Employed One year's history required and with current employer for at least 6 consecutive months & permanent member of staff

Zero Hour Contracts Depends upon nature of work & how long for

Future Income (e.g. pay rise/ promotion/ new job)

Individual circumstances reviewed.

All cases are robustly assessed and underwritten based on affordability. This is done by asking the applicant to complete a detailed breakdown of their monthly income and expenditure along with providing their last 3 months bank statements. Expenditure will include monthly payments towards financial commitments in addition to normal household expenditure which will be assessed for reasonability.

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Interest only

Interest only mortgages are only acceptable where the LTV does not exceed 70%. In all cases applicants will be required to have a plausible credible repayment strategy in place. Evidence to support the plausibility of the repayment strategy will be sought and recorded on the mortgage file. Should evidence not be available or prove inconclusive, the application will not proceed on an interest only basis.

Lender / Landlord references

For all new borrowers with applications of 80% LTV or below, where there is an existing mortgage, details on the credit search may be used to confirm a satisfactory payment record. If the current mortgage cannot be located on the credit search or the applicant has been living in rented accommodation, then a copy of the most recent mortgage statement or rent book will be required. Proof of payments by way of bank statements or rent receipts for the last 6 months will also be required.

For cases in excess of 80% LTV a satisfactory payment record covering a minimum of two years will be required.

Lending in/ into retirement

The Society will NOT consider interest only loans which take the borrower into retirement or where the borrower is in retirement. We have assumed the retirement age is 68. Lending in retirement max 70%.

Applications may be considered on a repayment basis where the loan does not extend beyond the age of 85 for either applicant.

Loan to Value (LTV)

Residential (Standard) 95% product specific

BTL (Standard)

Product specific 70%

New Build Flat (Residential) 95% product specific

New Build Flat (BTL) 70% product specific

New Build House (Residential) 95% product specific

New Build House (BTL)

70% product specific

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Mortgage term

The maximum term is 35 years (subject to a Higher Lending Charge where the LTV is over 80%).

There may be occasions when the term of the loan requested takes an applicant beyond their anticipated retirement date. We will assess the applicant(s) plans and ability to maintain payments into retirement with confirmation of their retirement income obtained in all instances. Where possible evidence will be sought and retained on the mortgage file.

Own insurance charge

The Society requires buildings insurance to be in force as a condition of the mortgage.

The Society offers competitive household insurance, although it's not compulsory that it is taken out through Darlington Building Society a quote can be obtained by contacting any of our branches.

Applicants are free to make their own arrangements and the Society will accept all major insurers.

Procuration fee

The Society currently pays 0.35% of the mortgage advance on the majority of it's mortgage products. Please check individual product details for any procuration fee exclusions. NB a procuration is not payable on ported products/ amounts.

Self –Employed:

For contractors, in addition to the below your most recent pay slip (which will confirm the net income for affordability calculation purposes) an employer’s reference will be sought independently of the applicant for all loans.

Min. Trading/Accounts Required 3 years

Declining Profit Considered? Individual circumstances

Latest Years Acceptable (If no, is it a 2 year Average or 3 year Average?)

3 years

Ltd. Company - Acceptable Income (e.g. NET Dividend or NET Profit (before Tax) or NET Profit (after Tax) + Salary)

Yes, if majority shareholders

Ltd. Company - Retained Profit Considered?

Yes

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Online Tax Calculations & Tax Year Overviews Accepted (as opposed to SA302)

yes

Accountants Computerised Tax Calculations acceptable? (e.g. as opposed to HMRC Online Tax Calculations)

Yes

Accountants Qualifications required Yes

Max. Age of Accounts We like to see the last 3 yrs and would expect them to be within the last 18mths as a max

Max. % shareholding to still be classed as Employed

Under 33% but we tend to use and accountant to complete the reference to indicate what the income is

Property

Flats above Commercial Premises no

Ex-Local Authority House Yes, considered subject to 80% Max LTV

Ex-Local Authority Flat No

Studio Flat/ Maisonettes

No

Flying Freehold Yes, considered

Freehold Flat No – unless Tyneside flats

Share of Freehold No

Length of Time Remaining on Lease 85 years from inception of the mortgage

Tyneside Lease Yes

Max. Stories (Flats) 4

Max. Number of Kitchens

No max but it would rely on the valuer if he suggested it would cause the property to be unmortgageable

Local Occupancy Clauses Individual circumstances will dictate

Second Residential (if acceptable, what is the max. LTV, how is the existing mortgage assessed (e.g. payment or

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balance) and what is an acceptable purpose e.g. dependant relative, holiday home etc.)

Yes but only available to immediate family members of the applicant.

Holiday Home No

Agricultural Ties Will Consider

Max. Land Acreage As long as no commercial usage

Annexe (if acceptable, do you also allow for no internal adjoining door and more than one kitchen)

Will consider

Sub-Let (e.g. rent out excess land to farmer, let out spare room(s) or Annexe as Holiday Let)

No

Min. ownership period of Vendor (e.g. in a purchase scenario, do you require the current owner to have owned the property for a minimum period of 6 months before considering an application from a prospective buyer)

No

Prefabricated Reinforced Concrete

No

Japanese Knotweed

No

Single Skin Construction

No

Other Non-Standard Construction

No

Property location

The Society will only consider mortgage applications for properties located in England & Wales.

Recent construction

Properties to be covered by a warranty provided by NHBC, Premier, LABC, Build-Zone, Castle 10, Protek, Q Assure, AEDIS or Architect Certificated, if constructed in the last 10 years.

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Remortgage legal fees incentive

enact Conveyancing Limited will be acting for Darlington Building Society with the legal aspects of a remortgage when a customer takes a product with free legal fees as an incentive.

Right to Buy

The Society will consider applications for people wanting to buy their homes under 'Right-to-Buy' legislation.

Society postcode operating area

The Society's geographical lending area is England and Wales. However, the Society's local operating area is defined as the following postcode areas: DL, TS, DH, YO, HG, SR

Solicitors

Solicitors must be appointed to the Society’s panel which requires the satisfactory completion of a questionnaire. The Society does not accept sole practitioners.

Standard valuation fees

Valuation fees are payable upon application and cheques should be made payable to Darlington Building Society. Failure to send in the valuation fee with the mortgage application will slow the mortgage application process down. Valuation administration fees are included in the total amount payable.

Purchase Price*/ Valuation

Standard Valuation Fee (£)

Homebuyers/ Scheme 2 (£)

Up to £100,000 185 375

Up to £200,000 220 475

Up to £300,000 255 575

Up to £400,000 365 675

Up to £500,000 470 750

Up to £600,000 580 845

Up to £700,000 690 940

* The fee charged is normally based on the purchase price of the property at the time of the inspection. If the price you are paying is preferential, or it is not known at the time of inspection, we will charge the fee based upon the valuation figure. ** Where a loan is made on condition that the property is completed or that certain work is done, a reinspection is necessary and the appropriate fee will be charged.

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Up to £800,000 755 1060

Up to £900,000 855 1185

Up to £1,000,000

955 1310

Up to £1,500,000

1230 1735

Up to £2,000,000

1630 2160

Additional borrowing / Reinspections

80 **

Fees apply from 9 November 2015.

Tenure

Approved categories are:

Freehold houses

Leasehold houses / flats

Minimum unexpired lease should be 85 years from the inception of the mortgage.

Commonhold

Verification of identity

For all new loans, the identity of the applicant(s) will be verified in line with Money Laundering Regulations. Mortgage applications must be submitted with original documentation accepted for ID purposes or copies of documentation (each item duly certified as a true copy).