Lending criteria | NatWest Intermediary Solutions

Lending criteria

For policy queries refer to A-Z below or contact us at LiveTALK

Only for use by mortgage intermediaries

A-Z of lending criteria

A

Age requirements • Affordability • Agricultural restriction • APRC • Adverse credit • Applicants (number) • Armed forces personnel

Age requirements

Applicants must be at least 18 years old at the time of application. The maximum age at the end of term is 70. 

 

Affordability

Our affordability calculator is the same one used by our underwriters:

  • Debts being repaid are not included in the calculation.
  • Pension and childcare costs are not included in the calculation (childcare costs are included in lifestyle expenses).
  • Maximum age for lending is 70, subject to affordability, if lending is beyond the intended retirement age.
  • Loans with less than six months to run are not included.
  • Assumes values for expenditure for basic essentials and quality living costs.

 

Agricultural restriction

The only acceptable agricultural tie is where the applicant must be employed in an agriculture related job and the primary source of income must not be related to the secured property. This is subject to a maximum LTV of 50%. Please note, the maximum plot size normally acceptable is 4 hectares/10 acres and there should be no evidence of tenancy or commercial activity.

 

Annual percentage rate of charge (APRC)

The APRC is all fees associated with the mortgage, whether added to the advance or not. This includes application fees, product fees, arrangement fees, booking fees, CHAPS and Telegraphic Transfer fees, fees charge by intermediaries, mortgage exit administration fees (sealing fees) and valuation fees. It is included on the Mortgage Illustration.

 

There is an additional cost illustration, known as the second ARPC. The second APRC presents a stressed interest rate scenario and illustrates what the product APRC would be if bank base interest rates rise to their 20-year high. Mortgages with a fixed rate for the entire term of the deal will not require this illustration.

 

We calculate the new APRC and second APRC in accordance with the guidance received from the Council of Mortgage Lenders (CML) and include both in the Mortgage Illustration.

 

Adverse credit

We consult credit reference agencies to look at credit and bank account conduct. 

 

We will not consider applications from individuals who have been subject to a bankruptcy order or an Individual Voluntary Arrangement in the last six years.

 

Applicants (number of)

The maximum number of applicants is two.

 

Armed Forces personnel

Unsecured personal loans are only acceptable for Armed Forces personnel who are eligible for a Forces Help to Buy (FHTB) loan which is an interest-free loan repayable over 10 years:

 

  • This will be allowed to be used towards an applicant's deposit but the monthly repayment as detailed on the Ministry of Defence ‘Personal Information Note’ must be included in outgoings for affordability.
  • The FHTB loan may not be used for the purchase of a second property, including a buy-to-let property. 

B

Back to back • Bank statements •Bonus • British national working overseas • Builder's Incentives • Buy-to-let

Back to back

Back to back is typically where the vendor has owned the property for less than six months, or remortgages where they've owned the property for less than six months.

 

Solicitors are required to disclose any transaction in the last six months and, if this happens, cases will be declined after offer unless the circumstances meet one of the following situations in which lending may be considered:

 

  • Customer funded purchase: when the customer has funded the purchase using their own funds or funds from a close family member and are now looking to set up a mortgage. The lending would be restricted to the lower of the original purchase price or valuation.
  • Bridging: residential mortgage applications where the customers required a bridging loan due to delays in selling the existing property, subject to normal underwriting. The previous property has now been sold and the applicants are looking for a mortgage on the new property with funds to be used to repay the bridging loan. Buy to let applications are not acceptable in this situation.
  • Inherited: a recently inherited property where the beneficiary wishes to release some of the equity for residential or buy to let purposes, or to buy the shares in the property inherited by others (e.g. siblings or joint beneficiaries). We will also consider lending where our customer wishes to purchase the property from a vendor who recently inherited the property. 
  • Porting: where a fixed/discounted rate was ported to a new property but has now expired and the customer wants to remortgage within the 6 month period to gain a new rate. Proof of the rate roll off has to be obtained e.g. mortgage offer/rate roll off letter from the previous lender.
  • Repossessed property: where the vendor is the mortgage lender in possession i.e. the property has been repossessed within the last six months and is being sold by the mortgage lender or their agent. This does not include repossessed properties being purchased cheaply at auction and then sold on by a third party. 
  • Part exchange: where the vendor is a large national house builder selling a property acquired under a part-exchange scheme.

Bank statements

We accept internet bank statements in paper format, which don't need to be certified by the issuing bank. However, they must show your client's name and the account number. For supporting documents please refer to our packaging guide.

 

Bonus

For guaranteed bonuses we will consider an average of the last two years' payments (cash element only) and use 100% of it in our affordability calculation. Please note that if there has been a sharp decline in the latest year's bonus the underwriter may use 100% of the most recent year's bonus.

 

For discretionary bonuses we will consider an average of the last two years' payments (cash element only) and use 50% of it in our affordability calculation. Please note that if there has been a sharp decline in the latest year's bonus the underwriter may use 50% of the most recent year's bonus. We will not consider deferred bonuses.

 

British National working overseas

Applicants must be resident in the UK. Applications will still be considered from serving members of HM Armed Forces, UK Diplomats or UK Consular staff, following standard residential mortgage criteria. HM Armed Forces consist of the Royal Navy, Royal Marines, British Army and Royal Air Force.

 

Builder's Incentives

  • The maximum amount of acceptable incentive is 15% of the purchase price of the property.
  • Portable and proportionate incentives, such as carpets and curtains, along with other financial incentives such as support with up-front costs such as Stamp Duty, legal fees or cashback or enhanced part exchange terms can be accepted in the 5% allowance
  • Non-standard items such as an upgraded kitchen or integrated appliances can be accepted as an incentive but do not need to be included in the 5% allowance. It will be the responsibility of the valuer to decide which incentives are included in the calculation 
  • To comply with the requirements of the Help to Buy schemes, customers must still fund a 5% deposit themselves
  • Lending is based on the lower of the purchase price of the property or the property valuation
  • The purchase price will not be adjusted for incentives, unless the total amount of incentives exceeds 5% of the purchase price. Incentives greater than 5% will be deducted and lending based on the reduced purchase price (unless the property valuation is lower) The example below explains this for a New Build residential house:

– Purchase price of the property: £120,000

– Incentives total: £8,000

– Incentives to be deducted from purchase price: £8,000 - £6,000 (5% of purchase price) = £2,000

– Reduced purchase price: £120,000 - £2,000 = £118,000

 

 

Buy-to-let (purpose)

A buy-to-let mortgage can be used for:

  • Purchasing new investment properties.
  • Remortgaging existing portfolios.
  • Equity release from unencumbered investment properties.

Buy-to-let (affordability)

Buy to Let affordability must be assessed using the Buy to Let affordability calculator. The Buy to Let affordability calculator determines that a Buy to Let mortgage is affordable based on 3 approaches:

 

  • Interest Coverage Ratio (ICR): The ratio of the expected monthly rental income from the Buy to Let property to the monthly mortgage interest payment which takes into account likely future interest rate increases. The minimum ICR threshold is 145%. Interest payments are calculated at the Buy to Let stress rate of 5.50%. If the rent expected from the property does not meet the 5.5% x 145% rental cover calculation, we can take into account any free personal income the applicant may have to make up the shortfall, as long as the expected rent meets a minimum rental cover calculation of 5.5% x 125%.
  • Income affordability test: The income affordability test is a detailed net free income calculation which takes into account the customer’s income (including rent from all of the customers properties), tax, national insurance, any tax liability that is associated with financing the Buy to Let property, credit commitments, essential expenditure.
  • Loan to income (LTI) Maxima (4.99).

Buy-to-let (eligibility criteria)

  • The property must be in England, Scotland, Wales or Northern Ireland.
  • The property must be a residential property owned by the applicant(s) and not for their own use at any time.
  • Applicants must be UK nationals, EU nationals or have indefinite leave to remain in the UK.
  • Applicants must be resident in the UK at the time of application.
  • We will not consider multiple tenancies, Homes of Multiple Occupancy, bedsits, DSS tenants or 'Related Person' tenancies.
  • Assured Shorthold (England & Wales)/Short Assured (Scotland) tenancy agreements are required.
  • Business partnerships and limited companies are not accepted, although NatWest Business Banking may be able to assist.
  • The maximum number of buy-to-let mortgages an applicant can have is four.
  • We cannot accept applications for regulated buy-to-let mortgages (where the occupants are immediate family members of the mortgage holder).
  • Applicants must be at least 18 years old at the time of application. The maximum age at the end of term is 70.
  • Minimum term is 3 years
  • Maximum term is 35 years, or 30 years if the loan is more than £500,000.
  • A minimum income of £25k pa is required (for joint applications at least one applicant must earn £25k).
  • Maximum LTV is 75% (for new build flats or houses a maximum LTV of 65% applies).

C

Carer's allowance • Cashback • Casual employment • Certification of documents • Child benefit • Commission • Committed expenditure  • Consent to let • Construction types • Consumer buy-to-let • Contractors  • Credit scoring

Carer's Allowance

Carer's Allowance is paid to people aged 16 or over spending at least 35 hours per week caring for someone with substantial caring needs. We accept 100% of a Carer’s Allowance.

 

Cashback

Where a mortgage product includes a cashback feature, it will be paid to the customer’s solicitor with their mortgage funds on the day the customer completes. The customer should agree with their solicitor how they would like to receive the cashback.

 

Casual employment

Contract/agency workers with income paid through a temp agency should be on a contract of no less than three months and income must be evidenced for the last 12 months. Piece workers must have a history of earnings over the past 12 months evidenced by P60s.

 

Certification of documents

When submitting copies of documents, please ensure that every page is clearly legible, certified with the words ‘true copy of the original’ and shows your company name and your full name (in BLOCK CAPITALS), together with your signature and date. Photographic documents in support of non face-to-face applications may also be used, and must be certified with the words 'true copy of the original'

 

Child Benefit

We can accept up to 100% of working tax credits, Child Tax Credits and Child Benefit. Please note that if an applicant is heavily reliant on these benefits (the ratio of benefits to main income) then please discuss these with your BDM but be aware that the final decision remains with the underwriter. The age of an applicant's children may be a factor so we recommend submitting the awards letter with as part go the application packaging. If the applicant earns more than £50,000, then we will not include Child Benefit.

 

Commission

We can consider accepting up to 100% of the commission an applicant receives. This must be proved to be regular e.g. monthly. We recommend that you review the applicant's last six months of payslips and include this evidence with the application packaging.

 

Committed expenditure

What to capture in other committed expenditure (this list is not exhaustive):

  • Private school/education fees.
  • Child Support payments.
  • Long term care for elderly dependents.
  • Shared equity fees.
  • Career related qualifications.
  • Ground rent.

Consent to let

The bank may be prepared to allow residential mortgage customers to rent out their current or a newly purchased property as a buy-to-let property under a consent-to-let arrangement under the following circumstances (this is not an exhaustive list):

  • Customer is unable to sell their existing home before buying a new property. 
  • Customer is currently in or moving to tied accommodation linked to their employment (e.g. boarding school teacher, vicar/minster, estate worker, army barracks etc.) The customer may not take occupation of the property until their current employment ceases which may be many years in the future.
  • Customer is a member of the Armed Forces currently serving elsewhere in the UK or overseas and property has previously been used as or is intended to be their main residence in the future.

Construction types

See 'Property Types'.

 

Consumer buy-to-let

Consumer buy-to-let is a type of regulated business introduced by the MCD to provide enhanced protections where buy-to-let customers are not acting for business purposes.

 

Our approach to identifying these customers is based on how they view their buy-to-let activity. We anticipate consumer buy-to-let will only apply to customers remortgaging a buy-to-let property where their objective is not to benefit from house price growth or rental income.

We include this question on our application: Will the property be let out for investment purposes?

 

By ‘investment’, we mean that you are looking to benefit from rental income or future house price growth.

If the answer to this question is ‘No’, the following message is displayed: Your selection has indicated consumer buy-to-let status. At present we do not offer this type of lending. In this case, the application will not progress.

 

We do not offer consumer buy-to-let mortgages.

 

Consumer buy-to-let will not apply to purchase transactions, customers with existing buy-to-let properties or any properties with current or future family occupancy. We will continue to apply a consent-to-let for existing NatWest mortgage customers looking to let out a property on a residential mortgage.

 

We include a disclosure on the new buy-to-let sales and offer Mortgage Illustrations to make customers aware that their loan is unregulated. We expect customer demand for this type of mortgage to be low and will monitor the emerging market to ensure we are aligned to market forces.

 

Contractors

For PAYE contract workers, we require one year's evidence (for example, two six-month contracts or four three-month contracts) and a contract in place for minimum of a further three to six months.

 

For contractors who earn more than £75,000 pa we’ll calculate their income as their average weekly contract income multiplied by 46, provided they can confirm evidence of:

  • their latest 3 months’ consecutive personal bank statements for their main account (not required if their main account is with NatWest or RBS)         
  • where significant business expenses are identified on the application, 3 months’ consecutive bank statements (personal or business) detailing these
  • a copy of contract(s) to encompass a 12-month period, with a minimum of 6 months’ contract(s) already completed immediately preceding the date of application.
  • they have taken no more than a six week break between contracts in the 12-month period
  • the tax position is paid and up to date.

 

Many self employed contractors may also trade via a Limited Company because it may be tax efficient for them to do so and subject to the criteria below we can help them under this policy . There is some additional information that you need to be aware of when submitting an application for a customer who meets these criteria:

  • When using the NWIS web site or MTE to submit an application, you must key the applicant as ‘Self-employed’ NOT ‘Employed’. 
  • Operating via a limited company. The applicant(s) must meet one of the following circumstances:

o   Single applicant owning 100% of the company

o   Joint application where one applicant owns 100% of the company

o   Joint application where the company is jointly owned

o   Joint application where one applicant owns 100% of the company and the other applicant is employed by the company (in this instance the employed applicant’s income should be excluded to avoid double-counting).

 

  • Significant business expenses not reimbursed as part of an applicant’s contract. Significant business expenses as detailed below, must be fully understood, evidenced and accounted for in the affordability calculation. Significant business expenses may be, though not limited to:

o   Car/finance loans

o   Extended travel and accommodation costs

o   Training courses

o   Professional indemnity insurance

o   Partner/spouse/employee salaries

 

  • Umbrella arrangements. We cannot use the high earning contractors’ criteria to consider applications from customers using an umbrella company arrangement. Under these circumstances we would consider an application under our standard self-employed policy.

 

 

Credit scoring

Credit scoring is a statistical tool used to assess an applicant for credit facilities and ranks applicants by probability of default. All applicants will be assessed using credit score and credit reference information (using one or more of the Credit Reference Agencies (CRAs), in addition to one or more of the following:

  • Information supplied as part of the application process.
  • Internal data relating to existing account(s) with the group.

 

D

Dependents • Discounted purchase • Diplomatic immunity

Dependants

This includes children under 18, those in higher education and financially dependent elderly relatives. Where the customer pays maintenance for a child, they should not be listed as a dependent.

 

Discounted purchase

Transactions at undervalue/gifted deposits: the purchase of a property from a family member or family business where the purchase price is less than the value and the vendor does not receive any monies for the difference between the purchase price and the valuation.

 

This situation is only permitted where there is a family connection and is subject to the solicitors providing a clear report on title or appropriate indemnity insurance. The maximum lend can be based on the valuation, not the actual purchase price. Provision of monies over and above the actual purchase price can be agreed at underwriter/sanctioner discretion subject to standard maximum LTV/FTVs.

 

Diplomatic immunity

We cannot lend to anybody working in the UK who has or may have diplomatic immunity under the Geneva Convention or inter-government treaties. This applies at all LTV levels, and is because the application would be immune from UK laws and we wouldn't be able to enforce repossession.

E

Early repayment charges • Employment status • Existing customers moving home/Porting • Existing customers not moving home • Existing customers- Remortgage

Early repayment charges

An early repayment charge will be incurred on any overpayment that exceeds the annual 10% limit. Please refer to the early repayment section of your Mortgage Illustration or offer document for information on early repayment charges that would be incurred if any overpayment exceeds the annual 10% limit.

 

Employment status

Applicants must have been living in the UK for a minimum of six months and have had six months' continuous employment in the UK (not necessarily with the same employer). If self-employed two years accounts required.

 

Existing customers moving home/Porting 

For NatWest customers moving house and not wishing to port a rate, they will follow the standard new business process.  For NatWest customers moving house and wishing to port their rate, please see 'Porting'

 

Existing customers not moving home - Switching/additional borrowing

  • NatWest: NatWest customers looking to switch onto a new mortgage at the end of their current deal or requiring additional borrowing should contact us direct on 0800 400 9999.
  • RBS: For product switching and additional borrowing/facility increases, RBS customers can contact the Existing Customer Sales Team on 0800 068 5512
  • The One Account: customers can contact the TOA new business sales team on to 03453 01 01 01.
  • Ulster: customers looking to switch onto a new mortgage at the end of their current deal or requiring additional borrowing should contact Ulster directly on 02890 276 431

Existing customers - Remortgage

NatWest: A customer whose mortgage is currently with NatWest cannot remortgage from NatWest to RBS

RBS: A customer whose mortgage is currently with RBS cannot remortgage from RBS to NatWest

Ulster:  A customer whose mortgage is currently with Ulster Bank NI (UBNI) can remortgage from UBNI to NatWest

 

F

Family purchase • Fees and charges • Freehold flats/Flying Freehold Properties • Foreign currency income • Foreign nationals

Family purchase

See 'discounted purchase'.

 

Fees and charges

  • Product fee: this is the fee payable for the selected product and can be added to the loan. 
  • Legal fees: these are paid to the solicitor for legal work done on behalf of the customer (i.e. transfer owenership of the property to them) and work undertaken on behalf of the lender (e.g. registering the mortgage deed). 
  • Occupier's consent form fee: this applies to other people living in the property age 17 or over (excluding dependants under 26). If the property is in England or Wales these people will need to sign a consent form and receive independent legal advice prior to completion, for which they are likely to be charged a fee. 
  • Variable valuation fee: this covers the cost of the valuation. 
  • Valuation admin fee: this covers the administration relating to the valuation (£75).
  • CHAPS fee: this is a charge for sending the mortgage funds to the customer's solicitor on completion (£30).
  • Early repayment charge: this is payable if customer repays all or part of a mortgage during the deal period.
  • Adding fees to the loan: product fees are the only fees that can be added to the advance.
  • Future fees: once your client's mortgage is set up, they may need to pay one-off fees for other services. These include changing the date of direct debit collection, duplicate statements, adding or removing someone from their title deeds.

If you'd like a copy of the individual 'fees and charges' leaflet, please contact us. 

 

Freehold flats and Flying Freehold properties

Where it is possible to enforce positive covenants, the maximum LTV is restricted to 90%. Before considering lending against this type of property, we rely on the valuer’s recommendations and the solicitor’s confirmation that the property title is good and marketable.

 

Foreign currency income

Where all or part of an applicant's income used to make the mortgage repayments is paid to them in a foreign currency, the MCD requires advisers to provide additional point of sale risk disclosures. It also requires lenders to monitor the customer’s foreign exchange exposure and notify them when it deviates adversely by 20% or more from the exchange rate at the point that the mortgage was completed.

 

The currencies we accept are: Great British Pound, Euro, Australian Dollar, Bulgarian Lev, Canadian Dollar, Croatian Kuna, Czech Koruna, Danish Krone, Hungarian Forint, Japanese Yen, New Zealand Dollar, Norwegian Krone, Polish Zloty, Romanian Leu, Singapore Dollar, Swedish Krona, Swiss Franc and United States Dollar.

 

(Also see 'Working abroad')

 

Foreign nationals

Applications from all full EU nationals resident in the UK will be considered, subject to our standard criteria. The maximum LTV is restricted for applicants from new EU member states and those who do not have permanent right to reside in the UK.

G

Gifted deposit • Guarantors

Gifted deposit:  Builder's incentive  

(see 'Builder's incentives')

 

Gifted deposit: family gift

  • We accept deposits (and gifts) from parents and guardians and treat them as if they were the applicant’s own deposit. This applies even where the money is advanced against a formal loan agreement or a second charge is put in place to secure the parents’ rights.  Any monthly cost relating to a formal loan agreement must be included in the affordability calculation.

  • Transactions at undervalue / Gifted deposits – the purchase of a property  from a family member / family business where the purchase price is less than the value and the vendor does not receive any monies for the difference between the purchase price and the valuation. This situation is only permitted where there is a family connection and subject to the Solicitors providing a clear report on title or appropriate indemnity insurance. The maximum lend can be based on the Valuation not the actual purchase price.

 

Gifted deposit: third party

Gifts from third parties (not sellers/vendors) are an acceptable source of an applicant's deposit, but only where there is no repayment required. We will require a signed letter from the third party confirming they have no interest in the property and that there will be no repayment required. The letter must be addressed to NatWest and confirm the amounts, who the money is coming from, who it's going to and the relationship to the applicant. 

 

Gifted deposit: vendor

Deposits provided by a private vendor by way of a second charge or unsecured loan are not acceptable. Vendor gifted deposits, where no repayment is required, must be treated as an incentive and be deducted from the gross purchase price to establish the net purchase price of the property. If, for example, the vendor is offering to pay Stamp Duty/legal fees/cashback on the property being purchased this amount must be treated as an incentive and be deducted from the gross purchase price to obtain the net purchase price. We will base our maximum lend on the net purchase price or valuation whichever is the lower, with the applicant putting their own deposit in.

 

Guarantors

We do not currently support mortgages backed by a guarantor.

H

Help to buy

Help to Buy: shared equity

Help to Buy shared equity mortgages are open to all intermediaries and available for new build properties only. Please note the following information:

  • Property must be in England.
  • Maximum property value is £600,000
  • Available to first time buyers and existing homeowners.
  • Applicants need a minimum 5% deposit.
  • Government will loan up to 20% of property value.
  • Applicant's mortgage must be for a minimum of 25% of the property value
  • Part Exchanges not permitted
  • It must be the primary residential and only property.
  • We offer specific 75% LTV mortgages to support this scheme.
  • Need to apply for eligibility through a HomeBuy Agent in region of desired property.
  • 3% of equity loan per year is factored into affordability calculation as a monthly commitment.

 

Help to Buy: London

The customer must have a minimum deposit of 5% and the Government will provide an equity loan of up to 20% of the property value.  In specific London boroughs the Government may provide an equity loan of up to 40%. The equity loan must be repaid by the end of the mortgage term or upon the sale of the property, whichever comes first. The customer must take a mortgage of at least 25% of the value of the property they are purchasing.

 

 

Help to Buy: mortgage guarantee

The Help to Buy: mortgage guarantee scheme is coming to a close at the end of 2016 and we have ceased to accept new applications under this scheme. We do however offer residential purchase products up to 95% LTV for first-time buyers and existing home owners. New Build properties cannot be purchased with these deals – we have a specific range of deals to support those customers buying through the Help to Buy shared equity schemes. The maximum property value is £600,000. Applicants must contribute at least a 5% deposit themselves. There’s no limit on the amount of income an applicant can earn and repayment must be on a capital and interest basis only.

 

I

Incapacity benefit • Identification • Interest only

Incapacity benefit (now known as Employment & Support Allowance)

We can consider up to 100% of incapacity benefit as an additional income, subject to an underwriter’s discretion. 

 

Identification

As part of the scoring process, we will attempt to electronically verify and validate the identity of an applicant. If successful, you will receive a message at the point of application submission to confirm that we will not require any further proof of identity for your customer. Where we are unable to verify their identity, you will be asked to send us certified copies of their identity documents.

 

Interest only

In addition to standard mortgage criteria the following also applies for Interest only mortgages: 

  • Minimum sole income is £75,000pa (excluding discretionary bonus).
  • Both new and existing customers may apply.
  • LTV of up to 75% (if repayment strategy is Sale of Property interest only amount cannot exceed 50% LTV.  A further 25% LTV can be borrowed on a C&I repayment basis).
  • Maximum term of 35 years (30 years if loan is more than £500,000) .
  • Age range of 18-70.
  • Minimum interest only portion of loan is £25,000.
  • Available for purchase (including first time buyer), re-mortgage, additional borrowing and porting.
  • Debt consolidation is not permitted
  • Where the entire mortgage is on IO the property must have a minimum equity of £200,000
  • Where there is an element of IO and Capital & Interest (C&I) the underwriter must be satisfied there is a minimum of £200,000 equity at end of term when C&I element has been repaid.

L

Large acreage • Leasehold • Lending limits • Let-to-buy • Lending into retirement • Letting to a family member • Limited company directors • Live/Work properties

Large acreage

We will not consider properties with a plot size in excess of 4 hectares/10 acres.

 

Leasehold

We require a minimum of 30 years to be remaining on the lease at the end of the mortgage term. However, some flexibility is allowed for properties in prime locations in central London, where the minimum lease left at the end of the mortgage should be 10 years. If the lease left is under 85 years, then please discuss this with your BDM for further guidance. 

 

In all instances, assessment will be made based on the valuer's comments.

 

Lending limits

 

Mortgage amount

Maximum LTV

< £550,000

 90%*

£550,001 - £1M

 85%

> £1m

 75%

All buy to let

 75% 


*95% Mortgages are available up to a maximum loan amount of £570k, subject to scheme criteria

 

 

Let-to-buy

If the rent received on the existing property covers the mortgage payment we will not include this in our affordability assessment on the new property.   

 

  • Applicants need a letter from a local ARLA-registered letting agent or estate agent to show the expected rental income. If it covers the mortgage cost then this payment can generally be disregarded from the affordability calculation. If there is a shortfall in rent then this must be disclosed as a monthly commitment on the affordability calculator.
  • If either of the mortgages is with another lender, the LTV of the mortgage with NatWest cannot be higher than the one with the other lender.

 

Lending into retirement

Where an applicant is looking to take their residential mortgage past their intended retirement age and their income will be relied upon to service the mortgage, we will require details of their income into retirement. The level of information required will depend on how far away from retirement the applicant is at the time of application.

 

If the applicant is more than 10 years away from their intended retirement age at the point of application you must provide documentary evidence of the existence of a pension or retirement provision (this can be a pension contribution on a pay slip, pension statement, etc.). There is no requirement to prove the pension will yield an income sufficient to repay the mortgage. 

 

If the applicant is less than 10 years away from their intended retirement age at the point of application you must provide documentary evidence of the applicant's post retirement income in the form of one of the following (this list is not exhaustive):

  • Annual pension statement from the employer or pension provider(s) showing the age (or date) when the pension becomes payable and the amount.
  • Department of Work and Pensions forecast of Graduated, SERPs or State Pension with details as above.
  • Statement/letters from previous employers showing the values of preserved pensions, the date they become payable and the basis of indexation/revaluation.
  • Tax return, accounts or bank statements showing receipt of income from investments or net rental income (after costs including mortgage payments).

An affordability check will be carried out utilising the income in retirement to ensure the requested amount is affordable for the whole term. Underwriters will assess the credibility of the applicant's retirement age in relation to the applicant's occupation. It will be assumed that commitments will have been repaid by the applicant's intended retirement age.

 

If the retirement income is insufficient, or the evidence is unsatisfactory, the term and/or amount will be reduced to ensure repayment of the borrowing by retirement. The maximum age at the end of the term is 70 and the maximum term is 35 years. For non-income providers these checks are not required.

 

All of the above requirements apply equally to employed and self-employed applicants.

 

Letting to a family member (regulated buy-to-let)

We do not currently support regulated buy-to-let.

 

Limited company directors

For limited company directors applying for a mortgage, we take an average of their last two years' salary and dividends. Directors must own at least 20% of the company.

 

 

Live / Work properties

If the customer intends to run a business from the property, we can provide a mortgage only if the property is being purchased primarily for residential use and can be readily restored in its entirety to owner occupation. Typical examples of these customers might be architects, accountants, chiropractors, physiotherapists, etc. running a business from an office or room in their home. 

To qualify for a residential mortgage or buy-to-let, the work area of the property must be no greater than 20% of the total property area. Live/Work properties are not to be used as commercial outlets, as only one room in the property is dedicated for business use. 

Where a customer is purchasing a purpose built Live/Work unit located in a development of a similar type properties, we will not offer a residential mortgage. The title restrictions on this type of property can affect future sale. Unacceptable commercial activity includes but is not limited to:

  • Bed and breakfast, guest houses, holiday let accommodation
  • Country estates, equestrian centres, campsites, kennels, farms or agricultural use or livestock kept for commercial purposes, forestry, fishing/hunting rights and crofts (regardless of whether this is to meet agricultural restrictions)
  • Post Offices. 

M

Maintenance • Maternity leave • Maximum LTV • Mortgage Credit Directive

Maintenance

We can accept income from court ordered maintenance, child maintenance, and income from family-based or non-court ordered maintenance and child maintenance provided that the payments have been in place for at least six months and are expected to continue at the current level for the foreseeable future, taking into account the age of children.

 

Maternity leave

We require evidence of an applicant's income via their most recent three months' bank statements and their last three months' payslips, prior to their maternity leave. We will use the applicant's basic salary they earned prior to going on maternity leave for affordability purposes. We reserve the right to request additional information if required. We will ask the applicant to confirm that they intend to return to work after their maternity leave but will not seek the employer to confirm.

 

Maximum LTV: residential

The maximum LTV for a standard residential is 95%. The maximum LTV for a new build house is 85% and for a new build flat is 75%, on a residential basis (subject to product range).  Also see 'Lending limits'

 

Maximum LTV: buy-to-let

The maximum LTV for a standard buy-to-let is 75%. The maximum LTV for a new build buy-to-let is 65% on both houses and flats (subject to product range).  Also see 'Lending limits'

 

Mortgage Credit Directive

The European Mortgage Credit Directive (MCD) came into force on 21 March 2016. It aims to harmonise mortgage markets across the European Economic Area, ensuring that mortgage firms act fairly and professionally and that their staff have an appropriate level of knowledge and competence for advising, manufacturing and servicing mortgages. The key issues that lenders and brokers had to incorporate into their businesses were:

  • The Key Facts Illustration (KFI) was replaced by the new European Standard Information Sheet (ESIS), which incorporates a new Annual Percentage Rate of Charge (APRC) and second APRC.
  • A new approach to monitoring customers’ foreign exchange exposure, including where part or all of their income is in a currency other than sterling.
  • A new classification of consumer buy-to-let mortgages.
  • A new 7-day reflection period.
  • Greater transparency over declined applications.
  • Regulation of second charge lending.

European Standard Information Sheet (ESIS): the MCD replaced the old sale and offer Key Facts Illustration (KFI) documentation with a new European Standard Information Sheet (ESIS) template, called a Mortgage Illustration in the UK. This document includes some additional disclosures for customers to ensure they fully understand their mortgage product and the risks of future interest rate increases. Transitional arrangements are in place to enable lenders to use a KFI 'top-up' approach before moving to the new Mortgage Illustration no later than March 2019. We have implemented the use of the new Mortgage Illustration without the transitional step of using the KFI 'top-up'.

 

7-day reflection period: the MCD introduced a new 7-day reflection period to ensure borrowers have sufficient time to duly consider the various offers they receive. Therefore, when a mortgage offer is made to a customer, there is a 7-day reflection period where the customer’s offer will remain valid for them to accept. At any point during this period the customer can accept the offer, and likewise reject it, or allow the offer to lapse.

 

We already give our customers longer than 7 days for them to consider offers they receive, so this will not have any impact on our current processes. If a customer wishes to complete the mortgage at any point during the 7-day reflection period they can waive the period by accepting the offer. We will still retain our right to review our decision to lend should new information be provided that changes a customer's eligibility.

 

Mortgage application declines: the MCD required greater transparency when a mortgage application is declined by a lender. If a customer has their application declined, they need to be told of this decision in a timely manner. Furthermore, if the decline is as a result of information held about the customer by a credit reference agency, the applicant must be informed of the particular agency used.

 

We currently use Equifax as our credit reference agency of choice. Where a customer’s application is being arranged by an intermediary and is declined, it is the responsibility of the intermediary to inform the customer of the credit reference agency used if this is the reason for the decline.

 

Regulation of second charge mortgages: the MCD required that second charge lending becomes subject to FCA mortgage rules. Lenders’ and intermediaries’ existing mortgage permissions enable them to operate in the second charge lending sector and the FCA contacted them in the first quarter of 2016 to find out if they intend to do so. We do not currently operate in the second charge lending sector and have no intentions to do so.

N

New build

New build

 

A new build is defined as any property built, first occupied in its current state or significantly modernised, refurbished or altered within the last two years.

 

The maximum loan-to-value on a residential new build house is 85% (65% for buy-to-let). For a residential new build flat, the maximum is 75% (65% for new build buy-to-let flats). The amount will be calculated on the net purchase price or the valuation, whichever is the lower.  Also see 'Builder's Incentives'

 

O

 Offer of loan • Overpayments • Overtime

Offer of loan (validity)

All mortgage offers are valid for six months.

 

Overpayments

You can overpay a maximum of 10% of your outstanding mortgage balance in each 12 month period – commencing on completion of your mortgage and continuing from each anniversary of that date until the end date of the rate – without incurring an early repayment charge. If your mortgage is made up of more than one part you can overpay up to a maximum of 10% of the outstanding balance of each part.

 

An early repayment charge will be incurred on any overpayment that exceeds the annual 10% limit. You benefit immediately from overpaying directly to your mortgage. If you make an overpayment or lump sum payment then the amount you owe, and the amount of interest you pay, is reduced immediately.

 

Regular overpayments: You can arrange to set up, discontinue or alter a regular overpayment in writing or by telephone at any time after completion of the loan. We must receive your request at least 14 days prior to your next payment day in order to be processed in time for that payment, otherwise the change will take effect from the following your payment day.

 

Regular overpayment amounts will be collected with your monthly payment and will not be varied automatically as a result of any change to the interest rate. The agreed overpayment will continue to be collected with the revised monthly payment after any such change.

 

Overtime

To work out how much overtime we will use, please deduct the applicant's basic year-to-date income from their total year-to-date income. This will give you their year-to-date overtime. We will divide this figure by the number of months that have elapsed in the current tax year, and then multiply it by 12 to achieve an annual overtime figure. For example, in November you would divide the year-to-date overtime by 7 as the last full month with a payslip will be October, which is the 7th month in the tax year (April-October = 7 months) and then multiply it by 12.

P

Porting • Probation • Procuration fees • Property types

Porting

To obtain a Mortgage Illustration for your customer, go to our Forms and Guides section and download the Mortgage illustration request form.  Please complete and send it to kfirequests@natwest.com.  We will email the Mortgage Illustration to you within 48 hours. 

 

Ported applications can be submitted online and the generic ‘Ported Product’ should be selected from the drop down product menu.  Full details of the product mix should be supplied in the additional information section.

 

For existing customers of the below brands who wish to port, the customer must contact the number below directly:

  • Royal Bank of Scotland: contact Mortgages Direct on 0800 056 0567. 
  • The One Account: contact TOA new business sales on to 03453 01 01 01.
  • First Active: contact First Active mortgage sales support team on 08453 011 301.
  • Ulster Bank: contact Ulster on 02890 276 431

 

Probation

There should be six months of continuous employment, although this doesn't need to be with the same employer. In the event of a joint application where affordability is met based on the main applicants income only, there is no requirement for the joint party to meet the continuous employment requirements. 

 

Applications can be considered from graduates who are in full time employment and completing a period of probation, as it is rare for permanent status not to be confirmed.

 

Procuration fees

Residential mortgages: 0.35% gross (DA firms), or 0.40% gross (AR firms).

Buy-to-let mortgages: 0.45% gross (both DA and AR firms).

Maximum £6,000

Minimum £250

Information correct as at 3 April 2017.

 

Property types - acceptable 

Subject to the valuer confirming saleability and suitability for mortgage purposes, we can lend against the following:

  • No-fines concrete construction.
  • Steel framed houses (exceptions apply, please check).
  • Flats over or immediately alongside business premises.
  • 100% timber construction.
  • Properties containing high alumina cement.
  • Freehold flats - where it is possible to enforce positive covenants, the maximum LTV is restricted to 90%. Before considering lending against this type of property, we rely on the valuer’s recommendations and the solicitor’s confirmation that the property title is good and marketable.
  • Agricultural restrictions - the maximum LTV will usually be 50% but each case will be assessed on its own merits.
  • Properties used for business - we can only lend if the property is primarily for residential use and the work area of the property is 20% of the total property area or less.
  • Leasehold properties - there must be at least 30 years left on the lease at the end of the term (we may consider less for properties in central London).
  • Flats (on any level) in multi-storey type properties are usually acceptable, subject to exceptions e.g. where the valuer identifies issues with the building and/or locality which are likely to adversely affect resale.

Property types - unacceptable

  • Properties with a floor area of less than 30m2.
  • Properties with a plot size in excess of 4 hectares/10 acres.
  • Properties listed under the Housing Defects Act (valuers will advise us if the property falls within the Act).
  • Steel clad houses.
  • System built concrete construction.
  • Prefabricated/(pre)reinforced/poured or shuttered concrete construction.
  • Easi-form construction (except by Laing from 1945 onwards).
  • Mundic block property.
  • Properties built on contaminated land.
  • Timber-framed property with cavity wall insulation unless installed during construction.
  • Multi-ownership properties.
  • Shared ownership properties.
  • Working farms, smallholdings and crofts.
  • Where the purchase of the property was completed within the last 6 months e.g. where a property has been purchased either with a mortgage or short-term loan and a mortgage application has been submitted immediately or shortly afterwards. This does not affect applications from customers who have had a bridging loan simply because of delays in selling the existing property, subject to normal underwriting.

R

Reduction in income • Regular bonuses • Rental income • Rental yield • Repayment methods • Right to buy

Reduction in income

For self-employed applicants where there has been a reduction in profits/income from the previous year to the most recent year, underwriters may use the most recent lower figure, rather than an average of the last two years.

 

Regular bonuses

For regular bonuses that are paid monthly, we can consider up to 100% (cash element only) providing there is six months of evidence. This will need to be entered as a guaranteed bonus on the AIP and full application, and will be subject to the full underwrite. Please note that we cannot use this income as part of the minimum income of £100,000 for interest-only mortgages.

 

Rental income

We can take rental income into account if it can be can be evidenced by two years of accounts or SA302s. We will take an average of the last two years' net profits.

 

Rental yield

Refer to 'Buy-to-let (affordability)'

 

Repayment methods

The following methods are acceptable: capital and interest (C&I), interest only (IO) and mixed.

 

Right to buy

We will consider lending up to 100% of the discounted purchase price or 90% of the market value, whichever is less. The minimum loan is £10,000, or the product-specific minimum, which ever is the highest, and no higher lending charge is payable.  Further advances for non property related purposes are not allowed during any discount period.

S

Scottish transcripts • Seafarers • Self-build • Self-employed • Shared equity • Shared ownership • Source of deposit • Sole trader / partnerships • Standard variable rate • Student loans

Scottish transcripts and home reports

Transcripts are only acceptable for Scottish residential property purchases and only where they are a re-type of the Home Report valuation. The home report valuation must have been carried out by a valuer on our panel and be less than three months old. We must instruct the transcript request. Transcripts instructed by any other party are not acceptable. 

 

Transcripts will not be requested where the property has an estimated value of more than £1m.  For buy-to-let purchases, a standard valuation will instead be instructed.

 

Seafarers

We can consider Sea Farers income if this is paid in an acceptable currency to NatWest and can be evidenced via payslips (if tax is paid source) or via most recent 2 years SA302s. The client must also have permanent right to reside in the UK & must live in the UK when not at sea.

 

Self-build

We do not currently support self-build mortgages.  

Self-build Remortgage

We are unable to support customers seeking to remortgage a self build property completed in the last 2 years. Customers can continue to remortgage to older self build properties.

 

Self-employed

Self-employed applicants are able to complete their tax self-assessments online. Copies of online submissions are acceptable provided:

  • It is clear from the document that the return has been submitted to HMRC (100% complete) and is not simply at the 'In Progress' stage.
  • The applicant provides a copy of their Tax Year Overview.
Shared equity

We lend on the Government-backed shared equity schemes. We require a minimum 5% deposit from the applicant and the minimum LTV must be 25%. 3% of the equity share will need to be factored into the affordability calculation as a monthly commitment. We do not currently offer a shared equity scheme remortgage product. The following eligibility criteria apply:

  • The applicant will be planning to live in the house and not rent it out i.e. it will be the main residence
  • The applicant cannot own any other property, in full or in part
  • The property must be in the UK
  • The applicant(s) must meet our affordability criteria
  • The applicant(s) must meet our underwriting criteria such as an acceptable valuation and being able to provide proof of income, etc.
  • The mortgage must be taken out on a capital and interest repayment basis
  • The scheme is available to existing homeowners and first-time buyers purchasing a property.
Shared ownership
We do not lend against Shared Ownership properties where the customer does not own 100% of the property or will not own 100% of the property on completion of the mortgage. 
 
Source of deposit
We reserve the right to ask for proof of deposit on all mortgage applications. There is a section on our application form to provide an explanation of where the deposit has originated e.g. savings, gift, etc. We do not ask you to submit evidence of this up-front. However, the underwriter may wish to see evidence so we recommend sending in evidence of the deposit's origination for any first-time buyers and where a large deposit is not coming from sale of a property. Also see 'Gifted deposit'
 
Sole trader/partnerships
We will take an average of the last two years' net profits to assess affordability. For applicants who are self-employed on a partnership basis, we will take an average of their personal share of the net profit over the last two years.
 
Standard variable rate
A standard variable rate  (SVR) is a type of variable-rate mortgage. The SVR is a lender's default rate without any limited-term deals or discounts attached. A lender can raise or lower its SVR at any time. Standard variable rates tend to be influenced by changes in the level of the Bank of England's base rate. However, a lender may also decide to change its SVR while the base rate remains unchanged.
 
Student loans
Repayment of student loans is dependent on receipt of a minimum income. They need only be included as a financial commitment to be taken into account for mortgage affordability if the applicant is already making repayments.    

T

Tenure • Term

Tenure

Acceptable property tenure: Common Hold, Feuhold, Freehold, Leasehold and Sub-Leasehold.

 

Term

Minimum term is 3 years

Maximum term is 35 years, or 30 years if the loan is more than £500,000.

U

Unacceptable income types • Universal credit

Unacceptable income types

The following forms of income are classed as unacceptable for a mortgage application:

  • Bereavement allowance: paid to widows, widowers or surviving civil partners for a maximum of 52 weeks. Not acceptable as it's paid to reimburse personal expenditure.
  • Employee benefit trusts (EBT): this is a tax mitigation scheme used in conjunction with employment income.
  • Expenses: not acceptable as they're paid to reimburse personal expenditure.
  • Housing Benefit: payment of full or partial contribution to claimant’s rent. The full rental figure i.e. rent amount without receipt of the benefit, must be listed in the applicant’s commitments. Housing benefit is not acceptable for mortgage products. This has been incorporated into Universal Credit.
  • Income Support: payment for people on low incomes, working less than 16 hours a week and who have not signed on as unemployed. Can be accepted as a main allowance only if paid in conjunction with Disability Living Allowance. This has been incorporated into Universal Credit.
  • Job Seeker's Allowance: paid to people who are unemployed or working 16 hours or less per week. This has been incorporated into Universal Credit (on a limited basis).
  • Stipend: a form of salary paid for internship/apprenticeship. Only acceptable by exception, at the discretion of the underwriter, if they are comfortable with the evidence seen of the long-term nature of the income.
  • Third Party Income: earned by a spouse, partner, parent who are not included on the application.
  • Universal Credit: only certain elements of the Universal Credit are deemed acceptable as forms of income. Please see below for details.
Universal Credit
Universal Credit is made up of several different elements. We can only accept Child Tax Credit, Working Tax Credit and Employment Support Allowance as income. Income Support is only acceptable if paid in conjunction with Disability Allowance. To accept these, we will require copies of the awards letters.

V

Valuations • Valuation instruction • Valuation fees

Valuations: day one instruction

We are now instructing valuations on day one for all residential and buy-to-let purchase mortgages and remortgages for £500,000 or less. This will enable the underwriting and valuation processes to run in parallel, reducing the time a customer has to wait for an offer. We will provide customers with a full refund if their applications are declined on the grounds of affordability or credit scoring or where we cannot lend the full amount requested due to affordability issues.

 

Valuation instruction

A valuation will be automatically instructed within 24 working hours of an application being submitted for residential and buy-to-let purchase mortgage and remortgage applications for loans up to £500,000. For loans above £500,000 our processing team will contact you prior to the valuation instruction.

 

A valuation will always be obtained via a Panel Surveyor instructed by us.

 

The applicant may need to pay for a valuation report. For remortgage cases, the fees-assisted package applies to loans of up to £2 million. Where a fee is payable, it is based on the purchase price, or estimated value of the property. 

Where a valuation fee applies, the applicant will also be charged a valuation administration fee of £75, as outlined on the Mortgage Illustration.

 

Valuation fees

A valuation will always be obtained using a panel surveyor instructed by us (RBS Group). The customer may need to pay for a valuation report or a more detailed survey. This fee is based on the purchase price, or estimated value of the property. The following tables give a guide (fees are applicable from 16 Jan 2015).

 

Where a valuation fee applies, the customer will also be charged a valuation admin fee of £75 as outlined on the Key Facts Illustration.

 

Valuation
band

New standard
val. fee

Home buyers
survey

Building
survey

Up to £100,000 £123 £258 £510
£100,001 - £250,000 £173 £367 £641
£250,001 - £500,000 £277 £511 £799
£500,001 - £700,000 £459 £702 £1,111
£700,001 - £850,000 £552 £814 £1,268
£850,000 - £1 million £627 £927 £1,436
£1,000,001 - £1.5 million £1,185 By arrangement
£1,500,001 - £2.5 million £1,480 By arrangement
£2,500,001 - £3 million £2,070 By arrangement
£3,000,001 - £3.5 million £2,650 By arrangement
£3,500,001 - £4 million £2,960 By arrangement
£4,000,001 - £4.5 million £3,260 By arrangement
£4,500,001 - £5 million £3,510 By arrangement
£5,000,001 - £5.5 million £3,660 By arrangement
£5,500,001 - £6 million £3,810 By arrangement
£6,000,001 - £6.5 million £4,110 By arrangement
£6,500,001 - £7 million £4,410 By arrangement
£7,000,001 - £7.5 million £4,710 By arrangement
£7,500,001 - £8 million £5,010 By arrangement
£8,000,001 - £8.5 million £5,310 By arrangement
£8,500,001 - £9 million £5,610 By arrangement
£9,000,001 - £9.5 million £5,910 By arrangement
£9,500,001 - £10 million £6,210 By arrangement

Adding fees to the loan

Product fees are the only fees which can be added to the advance.

 

Product fee

This fee is paid when the mortgage is arranged and is refundable until completion. If the customer's mortgage does not complete after the Offer of Loan is issued, the withdrawal fee is payable.

 

Once your client's mortgage is set up, they may need to pay one-off fees for other services. These include changing the date of direct debit collection, duplicate statements, adding or removing someone from their title deeds.

 

If you'd like a copy of the individual fees and charges leaflet, contact us.

W

Working abroad  • Working and family tax credits

Working abroad

Previously, we required applicants to be employed full-time by a multinational company and we needed to understand where their company’s head office was based. This no longer applies. 

 

Self employed income can be considered where their company is based in the UK and the Republic of Ireland (including Partnerships/Directorships).

 

Assuming all other criteria is met, it is not a requirement that the applicant pays their income tax in the UK.

 

The currencies we accept are: Great British Pound, Euro, Australian Dollar, Bulgarian Lev, Canadian Dollar, Croatian Kuna, Czech Koruna, Danish Krone, Hungarian Forint, Japanese Yen, New Zealand Dollar, Norwegian Krone, Polish Zloty, Romanian Leu, Singapore Dollar, Swedish Krona, Swiss Franc and United States Dollar.

 

Acceptable - We may consider applications from people who:

  • work away for a number of weeks at a time but return to the UK when they are not working
  • work away during the normal working week and return to the UK at weekends 

This will always be subject to an underwriter’s discretion.

 

Not acceptable - We will not consider applications from people who:

  • work abroad and only return to the UK for holidays
  • are on secondments living permanently abroad for a short period
  • have bought a property abroad to live in

Working and Family Tax Credits

We can accept up to 100% of Working Tax Credits, Child Tax Credits and Child Benefit. Please note that if your customer is heavily reliant on these benefits (the ratio of benefits to main income) then please discuss this with your BDM and be aware that the final decision remains with the underwriter. The age of an applicant's children may be a factor so we recommend sending in the awards letter with the application packaging. If the applicant earns more than £50,000, we will not include Child Benefit.

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