BTL lending criteria

Affordability is calculated against the minimum rental cover and other policy requirements detailed within this document.

In the circumstance an application has not progressed to mortgage offer within 90 days, affordability must be reassessed on our current Buy to Let Variable Rate (BTLVR).

Arrangements to pay which have been repaid over 3 months prior to application will be accepted subject to individual case assessment.

Arrangements to pay which have been repaid within the last 3 months will be considered on an individual basis.

Arrears on any loan, mortgage, or credit agreement within 3 years of the application, may be considered where status 1’s or 2’s have been reported.

Applicants who have been discharged bankrupt or have settled IVA over 6 years ago can be considered.

Capital raising is permitted for any non-commercial reason up to 80% LTV, as defined below:

• Home improvements;
• Purchase additional land or property;
• Release of equity for any other non-commercial purpose (e.g family gift, holidays, weddings, etc.); or
• Transfer of equity.

For us to accept a purchase application and not be considered a CBTL, the applicant(s) or their relative(s) must not intend to live in the property now or in the future.

If it is a remortgage application and for us not to consider it to be a CBTL, the applicant(s) or their relative(s) must not intend to live in the property now or in the future and they must also have at least one other UK BTL property in the background.

A Buy-to-Let application will be classified as Non-Consumer (Business-Purpose) BTL where:

• The borrower is acting wholly or predominantly for commercial letting purposes, and there is clear evidence that applicants do not intend to use the property for personal use.
• Electoral roll registration at the subject property will result in the application being categorised as Consumer Buy to Let, which is not permitted and will therefore be declined.

Where there are no more than 3 CCJs per application, with a total combined value of £500. This can be accepted but must be satisfied prior to completion of the mortgage.

Legal Marketing Services (LMS) manage the Society’s panel of acceptable conveyancers. To see a full list of acceptable conveyancers, please click here.

Properties are expected to be of standard construction (walls of brick or stone and roof of tile or slate).

The below construction types may also be considered, subject to valuation:

• Timber frame with render cladding;
• Solid stone;
• SIPS (structural insulated panels);
• Oak framed;
• Metal (zinc) roof;
• Thatched roof;
• Grade II listing;
• PRC repaired properties with a 30-year insurance-backed guarantee and structural warranty; and
• All properties must have basic amenities (hot and cold running water, sink, bath/shower, inside toilet, electrical power, drainage, and waste disposal).

Acceptable deposit types* include:

• Gifted deposits;
• Foreign currency deposits  and gifted deposits which originated outside of the UK are accepted subject to the funds being deposited in the applicant(s) UK bank account prior to offer. To support the underwriting assessment, an explanation of the source of funds will be required, including originating country, and how the funds have been raised (i.e. savings, or sale of assets);
• Equity;
• Savings: For deposits above £5,000, a minimum of 2 months statements showing funds in GBP in a UK account is required; or
• Sales at under value (Concessionary Purchase).

Directors Loans for Limited Company BTLs
These are considered acceptable subject to the following conditions:

• Confirmation is obtained from the broker that there is no repayment schedule in place for the loan.
• Evidence of the deposit and its source must be provided in all cases.

*Please note, further criteria may apply.

Unacceptable deposit types include:

• Vendors incentives; or
• Builder’s incentives.
• Deposits originating from cryptocurrency or related digital asset sources.

Further advances for the purpose of debt consolidation are not permitted.

Defaults up to £500 maximum value and registered over 6 months ago, must be satisfied upon completion.

Telecommunications or Utilities defaults (satisfied or unsatisfied) that are less than £100 are acceptable.

Debt Management Plans taken out and repaid over 12 months prior to application will be considered based in the overall credit scenario of the applicant.

Debt Management Plans taken out and repaid within 12 months prior to the application will be considered on an individual basis. 

The Financial Action Task Force (FAFT) list will refer to all the approved countries, please click here to see the list.

The Society requires properties to have a minimum EPC rating of E, or a suitable exemption on application. Properties must also have a minimum potential C rating detailed on the certificate.

If your client is buying or remortgaging a flat in a multi-storey residential building, we will need information about the building’s external walls, cladding or balconies before we can confirm whether the property is suitable for a mortgage. 

We will consider cladding to be significant where it covers:

• around 25% or more of the visible outside of the building; or
• around 25% or more of a visible face of the building across several floors or along the main escape route.

How we assess the information

Any fire-risk assessment must be completed by an appropriately qualified professional, such as a Chartered Engineer or a Member of the Institute of Fire Engineers.

Using a FRAEW instead of an EWS1
We may accept a FRAEW Executive Summary instead of an EWS1 where the valuation confirms that the report:

• clearly states whether remedial work is required;
• confirms whether combustible materials are present; and
• has been completed by an appropriately qualified professional who meets RICS requirements.

Older EWS1 forms
We may accept an EWS1 form that is more than five years old where:

• the valuation is satisfactory;
• the valuer raises no concerns about the cladding, balconies or fire safety; and
• the valuer confirms that the existing EWS1 remains suitable for mortgage-lending purposes.

Important information
Each application is considered individually and is subject to valuation, evidence and our current lending criteria. Providing an EWS1 or FRAEW does not guarantee that we will be able to offer a mortgage on the property. If you are unsure what may be needed, please speak to our business development team. 

Transactions where the property is to be let to a family member are not accepted.

Applications from first time landlords will be considered. 

Further advances for existing customers will only be considered where they have held the mortgage with the Society for at least six months and are up to date with their mortgage payments.

Applications for home improvements are available up to 80% LTV.

Applications for HMOs will not be considered

The minimum ICR stress rates are detailed in the table below:

Or payrate if fixed for 5 years or longer 

For Ex-Pat BTL, the basic rate taxpayer ICR calculation will be used for expat applications unless an applicant has UK based income that places them into the higher rate tax band, resulting in the higher rate tax calculation being used.

In circumstances where fees are being added to the loan, the ICR calculation must be calculated on the gross loan amount (including all fees).

The rental income detailed on the valuation report will be used to support the ICR assessment. The total rental coverage for any background Buy to Lets owed must exceed 140% (or 125% for Limited Companies). This can be calculated across the investment portfolio on an interest only basis.

Transactions where a family member is the vendor are acceptable providing that it is a clear and transparent sale, and that all appropriate taxes (i.e., stamp duty) are paid at completion. In these circumstances the Society will require separate legal representation for the applicant and vendor.

Extreme caution will be exercised in the presence of Japanese knotweed or other invasive species.

If the property is subject to licensing issues, there may be an adverse effect on potential rental income and future saleability of the property.

If the property is in a Selective Licencing area and the licensing is in respect of the property owner, the Society will rely on valuers’ comments, but applications will be considered.

Where our valuer confirms that the property is in a Selective Licencing Scheme due to being in a lower income area the application will be declined.

Applications will be accepted from Limited Companies on the following basis:

• The company must be a limited company set up solely to own/buy/sell/let property and must have one or more of the following SIC codes (Standard Industrial Classification)
  • 68100: Buying and selling of own real estate;
  • 68209: Other letting and operating of own or leased real estate; or
  • 68320: Management of real estate on a fee or contract basis.
• All directors and shareholders must provide a personal guarantee for the loan;
• All applicants must be people and not other limited companies;
• Maximum of four directors; and
• There must be no more than 3 buy-to-let properties in mortgage, including the property being mortgaged to the Society

There is a minimum loan amount of £50,000 for new mortgages, and £5,000 for further advance applications. A maximum loan amount of £1,250,000 applies. Applications for lending over £1,250,000 may be considered on a case-by-case basis.

The Society will consider lending on properties across England, Wales and Isle of Wight.

• Leasehold properties, with an unexpired lease of at least 85 years at the start of the mortgage, are acceptable subject to criteria.
• The lease must also have at least 60 years remaining at the end of the mortgage term.

Applicants must be aged 21 years or over at the date of the application. The mortgage term cannot extend past the applicant’s 95th birthday.

Mortgage offers are valid for 6 months from the date of issue.

Where the exchange of contracts has not yet taken place, but the solicitor can confirm completion within 10 working days, offer can be extended with no further checks. Outside this time frame, full re-underwrite and re-inspection of the property is required and a new product will need to be selected.

There is a minimum term of 5 years and a maximum term of 40 years. The term must not extend past the oldest borrower’s 95th birthday.

No minimum income required. 

Properties with mines within the boundary will be considered, based on the below valuation amendments:

Arrears on any loan, mortgage, or credit agreement within 3 years of the application, may be considered where status 1’s or 2’s have been reported.

Applications will be considered with up to four borrowers.

BTL applications are acceptable from customers whether they currently occupy their own residential property, provided they own at least one property at application. 

We will require proof of residency over the latest three-year period. Please, click here for acceptable proof of residency, or click here for Ex-Pat applicants.

The Society assesses the overall portfolio position of all portfolio landlord applicants to understand the sustainability and performance of their property holdings.
What is included in the portfolio assessment?
The portfolio assessment will include all Buy-to-Let properties owned by the applicant(s), including:

• Mortgaged properties held with any lender.
• Unencumbered Buy-to-Let properties.
• Properties held in a personal name.
• Properties held within a Limited Company.
• Houses in Multiple Occupation (HMOs).
• Student-let properties.
• In-flight purchase and remortgage transactions.

Where applicants jointly apply and retain separate ownership of other Buy-to-Let properties, all properties will be aggregated and assessed as a single portfolio.
The Society will consider portfolios of up to 10 UK Buy-to-Let properties, including the property(ies) being mortgaged with the Society.
The Society's security property must be suitable for standard residential Buy-to-Let use.

Commercial Properties
Portfolios may include commercial or mixed-use properties as part of the overall assessment. However, any portfolio containing a commercial element will be referred to the Technical Underwriting Manager for review and approval.

Lending Criteria for Portfolio Landlords
The following criteria apply to all portfolio landlord applications.

Security Property
For the property being offered as security to the Society:

These requirements apply to all applicant types, including individual borrowers, Limited Company borrowers and Expat applicants who have 4 or more BTLs 

Portfolio Assessment
The aggregate portfolio position must meet the following requirements:

The Society reserves the right to request additional information or supporting evidence where required to assess the performance and sustainability of the portfolio.

The Society will accept applications from Professional Landlords (a property owner whose sole source of income is derived from buy to lets).

Payday loans taken out and repaid over 12 months prior to the application will be considered based in the overall credit scenario of the applicant.

Payday loans taken out and repaid within 12 months prior to the application will be considered on an individual basis.

All properties will be considered on their merits irrespective of age. Properties built or converted within the last 10 years must hold an acceptable form of certification.

Houses, bungalows, flats and maisonettes must have a minimum value of £100,000, or £250,000 if located within Greater London.

Flats and Maisonettes will be considered subject to the below criteria:

• Must be a maximum of 10 storeys in the block including any basements (flats in blocks of more than 4 storeys require lift access regardless of which floor our security is on);
• Ex-local authority flats and maisonettes will be considered to a maximum of 6 storeys and blocks more than 4 storeys and require lift access. Valuers must also confirm the property is in a good area with good resale ability, and consideration given to the level of privately owned property within the block;
• Must have a minimum of 30m2 internal floor space;
• Flats above commercial premises will only be considered subject to valuation;
• Flats above “Sui Generis” (pubs and drinking establishments) and A5 (hot food takeaways) will not be considered;
• Freehold flats will only be considered if there is an appropriate management company in place; and
• Commonhold flats will be considered subject to valuation

All security properties must have suitable buildings insurance policy.

Applications from non-UK nationals can be considered subject to the following:

• Each applicant must have lived in the UK for a minimum of 2 years prior to application;
• Each applicant must provide a valid passport;
• For expat applications, clients must be British nationals.
• Each applicant must provide a valid visa giving indefinite leave to reside (previously termed indefinite right to reside & work) in the UK.
• Pre-settled status is not accepted.

If we are unable to meet the standard identification criteria, a valid passport may be required.

We will consider applications on the following basis:

• Capital and interest repayment;
• Interest only; and
• Part and part.

The Society will only accept a first charge on all properties.

A stressed rate of 6.5% is applied. For existing portfolios, the ICR requirement must be met across the portfolio.

For applications on products fixed for 5 years or more, these will be stressed at product rate.

Assured Periodic Tenancy agreements (‘APT’) are the only acceptable type of tenancy arrangement.

Assured Tenancy:
Care must be taken that an APT agreement is not confused with an Assured Tenancy as this type of agreement confers security over and above the Society’s charge to the tenant. This 
type of agreement will normally exist where the tenant is already in place and has been for a number of years. Under no circumstances will an assured tenancy arrangement be acceptable.

A tenancy cannot be an APT if:

• the landlord lives in the same accommodation
• the landlord is a local council 
• the property is purpose-built student accommodation, 
• the tenancy has a fixed term of over 21 years
• the rent is more than £100,000 a year
• the rent is less than £250 a year (less than £1,000 in London)
• it’s a business tenancy or tenancy of licensed premises
• the property is a holiday let

The following is considered as suitable tenure for security purposes:

• Freehold (excluding flats or maisonettes);
• Flying Freehold (maximum 15%);
• Leasehold (there must be at least 85 years remaining on the term at application and at least 60 at the end of the mortgage term); and
• Commonhold.

The Society will not consider the following application types: HMOs, holiday let, regulated (Let to Family Member) BTL, guarantor, bridging finance.

The below will not be considered:

• Insolvency;
• Logbook loans; and
• Previous repossession.

Circumstances where a partner is not party to the mortgage due to adverse will not be considered.

The below will cause a property to become unsuitable security:

• The property is/will be part used for the business purposes (unless it can be clearly demonstrated that this will not affect current value or resale prospects);
• Properties with spray foam insulation;
• Restrictive covenants/planning conditions exist which could affect resale (e.g., Agricultural Restrictions); or
• The property is divided in any way (e.g., to create a bedsit).