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Affordability assessment

Income multiples are used as an initial guide to the maximum amount of advance that may be considered.  A full net income and lifestyle expenditure analysis will be undertaken based on information received with the mortgage application form.

Increased multiples may be offered in certain circumstances to qualified doctors and dentists, please contact the Business Development department to discuss all cases.

The Income Multipliers will be based on the applicant’s annual income – £GBP confirmed for UK tax purposes after deducting the annualised value of other commitments (12 x monthly payments or 3% x 12 of credit card debts).

Our full affordability assessment will take into account the applicant’s net earned income and their expenditure analysis that is required in the mortgage application form.

Employed applicants

In some cases we write directly to the applicant’s employer for confirmation of their employment and income.

The employer will be asked to confirm that the applicant meets the following basic requirements, in addition to providing confirmation about earnings and other aspects of the employment:

  • Have been in their current employment for at least 3 months.
  • Be in a permanent position, not temporary.
  • Not be in a probationary period.
  • Not be under notice of termination or redundancy.
  • Not be subject to disciplinary proceedings.
  • If in current employment for less than 6 months, applicants must have previously been in the same type of employment with no employment gap, and an employer’s reference will normally be required.

The following will not normally be considered:

  • Seasonal employees.
  • Commission only sales staff.
  • Applicants wholly dependent on state benefits.

In addition to confirmed basic income, we will include the following additional confirmed earnings in our affordability assessment:

Guaranteed shift allowance, Large town allowance, Mortgage Subsidy, Car Allowance and up to 50% of other additional confirmable employment related income such as regular or guaranteed overtime and bonuses.

Please refer all cases whereby income from employment is likely to change in the foreseeable future, for example applicants undertaking maternity or paternity leave, for individual consideration.

Self-employed applicants

Self employed applicants must state in the mortgage application form their UK taxable income for each of the last 3 tax years.  In addition, the Society may require confirmation of taxable earnings to date in the current tax year.

We will require details in the mortgage application form of the applicant’s accountant from whom we may request confirmation of earnings and any other necessary income details together with certified copies of the last 3 years’ finalised accounts, and the corresponding HMRC Tax Year Overviews and corresponding tax calculations or SA302’s, unless these have been submitted with the completed mortgage application form. For applications of 80% LTV or lower, where the trading history is confirmed to be consistent, sight of only 2 years’ finalised accounts and the corresponding HMRC Tax Year Overviews and tax calculations/SA302s will usually be required.

For the purpose of confirming income of self-employed applicants’ acceptable accountancy qualifications include the following:  Chartered Accountant (ACA/FCA), Management Accountant (ACMA/FCMA), Certified Accountant (ACCA/FCCA), & Institute of Financial Accountants (IFA).  Refer other types of accountancy qualification for individual consideration.

The Society will normally assess affordability on income declared to, and agreed with HMRC for tax purposes, and in some cases it may also be necessary to obtain confirmation of current income.

Please note that retained profits are not included as income for the purpose of our affordability assessment.

Other forms of income

Unearned income and state benefits are not normally included in our affordability assessment.  Refer cases for consideration on an individual basis.

Guarantors and Joint Borrower, Sole Proprietor arrangements

A guarantee may be considered, subject to all parties meeting the Society’s lending criteria.  The maximum LTV for guarantor mortgages is 90%. The maximum LTV for Joint Borrower, Sole Proprietor mortgages is 95% LTV.

Alternatively, mortgages may be arranged on a Joint Borrower, Sole Proprietor basis where one of the joint borrowers is not going to be a co-owner of the property, i.e. to increase the borrowing capacity of close family members through a joint mortgage.  Residential mortgages on this basis are available to 95% LTV and we will also consider buy to let mortgages to 75% LTV.

The applicants must clearly state the requirement for this arrangement and the name of the sole property owner(s) on the application form in the ’Additional and/or Material Information’ section.

Up to 4 applicants will be considered.

The borrower who is not named on the Title should sign an ‘Occupiers Agreement to Mortgage’ deed if they will also occupy the property.   All borrowers must sign the mortgage deed.

All borrowers not named on the Title will be required to obtain independent legal advice.  Release of the advance will be subject to the receipt of the Society of confirmation that the advice has given by the solicitor, in the Society’s prescribed format.

All potential applications must be referred by telephone for a decision in principle prior to submission.

For the purposes of product selection, the product selected in all instances must be from the specified range.

Posted in: Guide to Terms & Underwriting