1 | P a g e
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 9
Lender / Landlord references 10
Lending in/ into retirement 10
Loan to Value (LTV) 10
Mortgage term 10
Own insurance charge 11
Procuration fee 11
Property age 12
Property location 13
Recent construction 13
Remortgage legal fees incentive 13
Right to Buy 13
Society postcode operating area 13
Solicitors 13
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.
2 | P a g e
Acceptable intermediaries
Intermediaries that are appropriately authorised by the FCA or are an Appointed Representative of an authorised firm. Intermediaries will be added to the Society's panel once the first mortgage application has been submitted and accepted.
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
Settlement evidence will be required. 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.
3 | P a g e Bankruptcy
A discharged bankrupt person will be considered providing evidence shows the discharge occurred a minimum of three years ago. Executive approval required.
IVAs
A discharged IVA person will be considered providing evidence shows the discharge occurred a minimum of three years ago. Executive approval required.
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. Executive approval required.
Debt Management Plans Considered, providing evidence
shows completed 3 years ago.
Affordability / income requirements
We will use this information to work out how much an applicant has left at the end of the month after their expenses (including mortgage payment). To meet our
affordability criteria, the amount at the end of the month i.e. the monthly surplus must be greater than £150.
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.
The following financial commitments must be deducted from the basic income before applying the multiplier;
4 | P a g e 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 gross monthly rental income equivalent to 130% of the monthly interest due. In all cases, interest due must be calculated at the agreed pay rate +1%. Minimum income from other sources (e.g. from employment) must be at least £25,000 & not include rental payment.
The tenancy must be by way of Assured Shorthold Tenancy for a term certain of 6 months or more.
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.
5 | P a g e 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.
6 | P a g e 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 and a second person authorised to release a mortgage offer.
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
8 | P a g e
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.
9 | P a g e If the mortgage LTV is above 80% up to a maximum of 95% a HLC is applicable (subject to a maximum advance of £250,000). 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 80.01 - 85% 4.05 6 4.293 85.01 - 90% 5.50 6 5.830 90.01 - 95% 7.35 6 7.791 95.01 - 100.00% 10.50 6 11.130 Income verification
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.
Self-Employed (Non limited companies)
Average of the drawings or net profit achieved in the last 3 years and on the assumption that
10 | P a g e 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
Probationary Periods No
Length of Time Employed
One year's history required 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)
Dependent & if evidenced in writing
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.
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 repayment strategy in place. Evidence to support the plausibility of the repayment strategy will be sought and
11 | P a g e recorded on the mortgage file. Should evidence not be available or prove
12 | P a g e
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 3 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 66.
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
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.
14 | P a g e
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.
Self –Employed:
In addition to the 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
Ltd. Company - Retained Profit Considered?
Yes 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 (which ones) – no specific but usual
AAT but we can use (SA302); the applicant should provide a copy of their Tax Overview Form.
15 | P a g e
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 subject to 80% Max LTV Ex-Local Authority Flat
No
Studio Flat No
Flying Freehold Yes
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 balance) and what is an acceptable purpose e.g. dependant relative, holiday home etc.)
No
Holiday Home
No Agricultural Ties
Will Consider
16 | P a g e
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 based in England & Wales. Scotland in later part of 2016.
Recent construction
Properties to be covered by a warranty provided by NHBC, Premier, LABC, Build-Zone, Castle 10, CRL inspection, Building Life Plans (BLP) or Architect Certificated, if constructed in the last 10 years.
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
17 | P a g e
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.
18 | P a g e
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 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 **
* 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.
Fees apply from 9 November 2015.
19 | P a g e
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).
