Mortgage Lending Criteria

Affordability Assessment

The Society will carry out an affordability assessment for all mortgage applications. This involves the Society verifying the income details keyed by checking these against income and expenditure documentation e.g. payslips, bank statements etc. The Society will also carry out a credit search to assist in underwriting the application.

The Society uses income multiples to give an indication of how much we may lend. See section I ‘Income Multiples’. This is only an indicator. An Affordability Assessment will also be carried out and forms part of our Decision in Principle (DIP).

Age Limits

The minimum age of applicant(s) is 18. If the applicant(s) age extends beyond their 71st birthday the application should be referred to your local branch office.

Apartments

The Society’s maximum LTV for apartments is 70%.

Applicant(s) – number of applicant(s)

The maximum number of applicant(s) for a mortgage application online is 2. If you have an application with more than 2 applicant(s) please refer the case to your local branch office.

Arrangement Fee(s)

Mortgage Arrangement fee(s) form part of the Society’s lending terms and may be payable at the time of the application or charged to the account. The fees may change from time to time. The Society’s lending package will contain individual guidance on particular products.

Valuation fee(s) also form part of the lending terms and are usually separate to the arrangement fee(s). Depending on market conditions and the business requirements of the Society valuation fee(s) may be adjusted from time to time. Valuation fee(s), where applicable, are payable at the time of application.

Building Warranty Providers

Where a property is under 10 years old the property should have a valid building warranty certificate.

The following warranty providers are acceptable to the Society:

• National House Building Council (NHBC);
• Global Home Warranties;
• An experienced Professional Consultant with acceptable qualifications and professional indemnity cover (PII) – see Section P ‘Professional Consultants’.

Business carried on in the property

Applicant(s) must inform the Society if any business will be carried on in the property to be mortgaged.

Buy to Let – other buy to let mortgages held

The borrower should not have more than 3 other mortgaged rented properties up to a maximum advance of £500,000.

Buy to Let loans

The Society does not currently offer Buy to Let mortgages.

Commercial Lending

Credit History

The Society will not normally consider lending to an applicant(s) who has ever:

1. owned a property which has been subject to a shortfall sale or taken into possession by a lender, either as a result of a voluntary arrangement or by court action;
2. failed to keep up payments under a mortgage or any other loan;
3. had a county court judgement registered against them;
4. been declared bankrupt or made arrangements with their creditors;
5. defaulted on any credit accounts.

Debt Consolidation

The Society may consider lending propositions which include a proportion of debt consolidation. The proportion of the loan for debt consolidation purposes should not exceed 25% of the total loan and should be no more than 50% of the gross main income.

Where any portion of the loan is for debt consolidation purposes the maximum LTV is 75%.

The Society will include a special condition for the particular debt(s) to be cleared from the proceeds of the Mortgage Advance.

Dependants

It is important that we consider the number of financial dependant(s) the applicant(s) have e.g. dependent children. Please confirm the number of dependant(s) the applicant(s) have by completing the relevant section of the application online. For other occupier(s) see Section O ‘Other Occupiers’.

Direct Debit Mandate

A Direct Debit Mandate must be completed for each mortgage application submitted to the Society.  The mandate must be signed by the applicant(s)/account holder(s) and must be received by the Society prior to release of an Offer of Advance.  The applicant(s) must provide a recent bank statement to verify the details on the Direct Debit Mandate.  You may upload a certified copy of the mandate when submitting the required documentation for the application or you may send the original signed mandate to the Progressive Branch dealing with your application.

The applicant(s) monthly mortgage repayment will be due on 28^th of the month.  This will be collected by direct debit on the last banking day of the month.  If this date is not suitable you must inform the Society by stating an alternative date of either 5^th or 15^th of the month in the ‘Additional Information’ section of the online application.  The first monthly payment will consist of both interest accrued in the month of completion and the first regular payment due.

Documentation

Various documentation is required to help the Society assess a Mortgage Application submitted (e.g. payslips, bank statements etc). See Section I ‘Income Confirmation’.

Fixed Term Contracts

For cases up to and including 90% LTV the Society will consider applicant(s) who are on a fixed term contract of employment.

Applicants must have been employed on a fixed term contract basis for a minimum of 12 months at the time of application and their contract should normally have been renewed at least once.

If they have not, they should normally have at least 24 months remaining on their current contract and consideration should be given to the likelihood of the contract being renewed and if so, for how long. The gaps between contracts in the past 12 months should normally total no more than 12 weeks.

A copy of the current employment contract or an employers’ reference is required as proof of income and employment, as well as 3 months payslips and 3 months bank statements.

The Society will normally only consider the income from a fixed term contract where the contract is likely to be renewed.

Applicant(s) who are on a fixed term contract, but invoices the employer via their own business (Limited Company), are treated as a self employed applicant(s).

The Society will not consider fixed term contracts in cases over 90% LTV.

Foreign Currency Lending

The Society is now lending to mortgage customers within Northern Ireland who will either:

• Make their monthly mortgage payments from an income that is earned in either Euro (€) or US Dollar ($), or
• Use an asset (vehicle/strategy) held in Euro or US dollar to repay an interest only balance.
• View Foreign Currency Mortgage products here.

Former local authority property

The Society’s maximum LTV for former local authority property is 80%.

Guarantor(s)

The Society may consider the use of Guarantor(s) where the income of the applicants to support the loan is marginally insufficient. In such cases, the Guarantor is required to produce evidence of income and expenditure to ensure that he/she is able to afford to make the repayments should the applicants default.

Guarantors are recommended to take independent legal advice.

The affordability assessment process should take account of known future changes to the customers’ circumstances.

The maximum LTV the Society will consider in guarantor cases is 80%.

Home Insurance

It is a condition of the mortgage for borrowers to have a minimum of buildings insurance in place for the property.

A borrower may arrange their own insurance subject to a condition that they will keep the property fully insured and assume full responsibility for all arrangements made and in no circumstances hold the Society or it’s servants responsible if they suffer loss because of any inadequacy or deficiency in the insurance arrangements made.

Impaired Credit

The Society will not normally consider lending to an applicant(s) who has ever:

1. owned a property which has been subject to a shortfall sale or taken into possession by a lender, either as a result of a voluntary arrangement or by court action;
2. failed to keep up payments under a mortgage or any other loan;
3. had a county court judgement registered against them;
4. been declared bankrupt or made arrangements with their creditors;
5. defaulted on any credit accounts.

Income / percentages taken into account for affordability purposes:

Income Confirmation

The Society will require confirmation of income and bank statements for all Mortgage Applications.  This allows the Society to verify the income and expenditure disclosed.

The documentation required to be submitted with an application is as set out below:

Income from second job

In cases where the customer has more than one job, the Society will consider amount of hours worked, length of time worked, how long the applicant(s) has been in both jobs. The Society will require payslips and bank statements to verify the income from the second job.  If the applicant(s) is paid in cash the Society will only take the income into consideration if we receive income confirmation from the HMRC (Tax Summary Calculation) or SA302(s) and corresponding Tax Year Overview(s).  The maximum income taken from second job is 50%.

Income multiples

The Society uses income multiples to give an indication of how much we may lend.

The Society’s income multiples are as follows:

These income multiples are for indicative purposes only and an application will still be subject to a satisfactory Affordability Assessment, Credit Search, Verification Check and Valuation.

The Society will also apply a maximum advance.  Please see section M – ‘Maximum Advances over an LTV range’.

Insurance (Property Insurance)

It is a condition of the mortgage that property insurance is in place.

Should the applicant(s) wish to arrange their own insurance they must ensure that the sum insured is at lease as recommended by the Society’s valuer under the terms of the Advance.

The Advance will be released on the applicant(s) undertaking to keep the property fully insured and that they will assume full responsibility for the arrangements made and in no circumstances hold the Society or its servants responsible if they suffer loss because of any inadequacy or deficiency in the insurance arrangements.

The applicant(s) must inform the Insurance Company of the Society’s interest in the policy.

Should the applicant(s) require a quotation for property insurance, please inform the Society in the ‘additional information’ section of the online mortgage application.

Interest only Mortgages

The Society’s maximum LTV for an interest only (or part interest only) loan is 75%.  The Society will only consider interest only (or part interest only) loans which have a credible repayment strategy in place.

The Society is unable to offer any advice on the suitability of any protection or investment products.

Interest only mortgages – Acceptable repayment strategies

Repayment Strategy – Endowment policy(ies)

With an endowment policy repayment strategy, interest only is paid to the Society and a monthly premium paid to an insurance company for the policy which pays a lump sum at the end of the mortgage term or on death if earlier.  The lump sum is used to repay the mortgage.  The lump sum at the end of the mortgage term is not guaranteed and may not be enough to repay the mortgage.  The life cover or the lump sum payable on death is usually linked to the amount of the mortgage loan.  The policy can be written in joint or single names. Repayment strategies cannot be accepted if they include the name of anyone not named on the mortgage.

The Society will require a copy of the latest projection statement dated within the last 12 months.  The Society will allow up to 100% of the middle growth projected outcome.

The Society is unable to offer any advice on the suitability of any protection or investment products.

 Repayment Strategy – Stocks & Shares ISA 

With a Stock & Shares ISA (individual savings account) repayment strategy, interest only is paid to the Society.

ISA plans can be funded on a monthly basis.  The capital built up in the plan is used to repay the mortgage at the end of the mortgage term.  There is no element of life cover with this method and the borrower must make separate arrangements to cover the mortgage in the event of death or critical illness.  There is no guarantee that the plan will produce enough to repay the mortgage.

For Stocks and Shares ISA the Society will require a copy of the latest statement dated within the last 12 months.  The method of determining the level of investment required at the outset of the loan is :

Loan amount x 120%
Term of loan (in years)

The Society is unable to offer any advice on the suitability of any protection or investment products.

Repayment Strategy – Pension

A pension repayment strategy is based on a personal pension plan and is designed to provide the borrower with a pension and pay off the mortgage capital.  With this mortgage interest only is paid to the Society and a separate premium is paid to a pension provider for the pension plan.  The plan will usually include some form of life cover.  This type of mortgage requires specialist advice.

For a pension mortgage the Society will require a copy of the latest projection statement dated within the last 12 months.  The Society will allow up to a maximum of 25% of the projected total fund or if only current value provided allow:

Loan amount x 120%
Term of loan (in years)

The Society is unable to offer any advice on the suitability of any protection or investment products.

Repayment Strategy – Sale of Second Home

The Society will allow sale of a second home as a repayment strategy provided there is sufficient equity to repay the interest only part of the mortgage.

The Society will require property details, confirmation of ownership and evidence of mortgage debt.  For loans less than 10 years equity at inception should be 100%.  For loans greater than 10 years equity at inception should be 75%.

Self build applications – sale of existing property and conversion to repayment

The Society will permit self build applications to be set up on an interest only basis until release of the final stage payment when the mortgage will be converted to a repayment basis.

Lending in Retirement

‘Lending in retirement’ occurs when the applicant(s)/borrower(s) are retired at the inception of the mortgage contract.

Retirement is not linked to age but is linked to income.  If the majority of an applicant(s)/
borrower(s) income is from pension income at the inception of the mortgage, then they are considered to be retired.

The maximum age for applicant(s) at the end of the mortgage term is 75 years.

The maximum LTV for ‘lending in retirement’ is 70%.

Where there are multiple parties to a mortgage with a mix of incomes it is important for the Society to understand and assess the source of income.  Where the majority of income is derived from one party or parties ‘in retirement’ then the entire mortgage will be categorised as ‘in retirement’.

Loans to applicant(s)/borrower(s) ‘in retirement’, which are either on a variable rate or short-term fixed rate increase the possibility that the borrower(s) may be unable to afford higher monthly payments should rates rise significantly.  Consequently, the Society will carefully consider the level of retirement earnings and we will seek appropriate information and assurances about the level of retirement income that will be available to meet continuing mortgage payments.

This type of Mortgage Application should be submitted to your local Progressive branch using a paper application, and not online.

Lending into Retirement

‘Lending into retirement’ i.e. to applicant(s)/borrower(s) who are currently in employment, but may have or will have retired before the term is scheduled to end.

Retirement is linked to age.  At the point of inception of the loan the age of the applicant(s)/borrower(s) at the end of the scheduled loan term will be noted.  If the term takes the applicant(s)/borrower(s) past the age of retirement i.e. the age the applicant(s)/borrower(s) have told the Society they plan to retire at age 70, the loan is considered to be ‘into retirement’.  Even if the applicant(s)/borrower(s) have stated they intend to work past the age of 70, once they have passed their anticipated retirement age or age 70 the loan is considered ‘into retirement’.

The maximum age for applicant(s) at the end of the mortgage term is 75 years.

The maximum LTV for ‘lending into retirement’ is 75%.

Where there are multiple parties to a mortgage with a mix of incomes it is important for the Society to understand and assess the source of income.  Where the majority of income is derived from one party or parties falling into the definition of ‘into retirement’ then the entire mortgage will be categorised as ‘into retirement’.

Where a loan is defined as ‘into retirement’ then an assessment of affordability following retirement should also be made referencing income after the applicant(s)/borrower(s) are past their ‘into retirement’ age limit. Both affordability assessments should reflect the full amount of the loan, since the mortgage payment should remain the same.

Loan to applicant(s)/borrower(s) who will be retired before the end of the mortgage term that are on either a variable rate or short-term fixed rate increased the possibility that the borrower may be unable to afford higher monthly payments when they retire should rates rise significantly.  Consequently, the Society will carefully consider retirement earnings prospects and we will seek appropriate information and assurances about the level of retirement income that will be available to meet continuing mortgage payments.

This type of Mortgage Application should be submitted to your local Progressive branch using a paper application and not online.

Length of employment

The Society will require an applicant(s) to be in employment / self employment for the following length of time:

• Employed – at least 6 months (and outside a probationary period);
• Self Employed – 3 years.  If an applicant has been self employed over 2 years but not 3 the Society may accept 2 years self employment plus one year’s projected income.  A referral should be made to the Society’s local branch office where less than 3 years can be confirmed.

Maximum Advances over an LTV range: (Mortgage Indemnity Guarantee Limits)

Lending over 80% LTV up to 95% LTV is subject to a mortgage indemnity guarantee which the Society will place with its’ insurance provider. This is insurance taken out by the Society for the Society’s benefit.

For our lending to meet the criteria of our insurers we will only lend up to a certain amount of loan depending on the LTV.

The maximum advance in these circumstances are as follows:

The Society has also set a maximum advance of 80% of value for loans in excess of £500,000.

Non-EEA Foreign Nationals (and EEA Foreign Nationals)

The Society will consider applications on the following basis:

EEA nationals:

• Confirm right to work and reside by reference to passport or national identity card plus Home Office registration (if appropriate)

Non-EEA nationals:

• Confirm indefinite leave to remain in UK (for applications to be considered, indefinite leave must be evidenced by a stamp in a currently valid passport or written confirmation from the Home Office).

The Society will not consider lending to non-EEA nationals who have limited leave to remain.

Applicant(s) must be resident in the UK for a minimum of 3 years.

Northern Ireland Co ownership Housing Association (NICOHA)

Advances to purchasers under the Northern Ireland Co-Ownership Housing Association (NICOHA) scheme are considered.

For NICOHA cases the Society’s maximum advance is 90% of the equity.  A copy of the NICOHA Offer Letter must be provided to the Society along with the application.

Occupancy

It is a requirement that the applicant(s) will occupy the property being offered for mortgage and they will obtain vacant possession.  If this is not the case, please inform the Society of who will occupy the property and/or any reason for a delay in occupying the property.

Offer of Advance

If the Society issues an Offer of Advance, the Offer will be valid for a period of 3 months.  The 3 month validity period applies to all purchase, remortgage and self build applications.  The Society will issue an Offer for a validity period of 6 months in the case of purchases for properties being constructed in new build developments.

The Society may require up to date payslips, bank statements or an updated credit search where we are asked to consider re-issuing an out of date Offer of Advance.

Other occupier(s)

The Society will require the name(s), date(s) of birth and relationship to the applicant(s) of any other party(ies) who will occupy the mortgaged property over the age of 17 (other than the applicant(s)).  Other occupiers must sign an Agreement & Undertaking in the presence of the acting Solicitor.

Probationary Period

Applicant(s) for a mortgage must be in their current employment contract for at least a period of 6 months at the time of application and must not be inside a probationary period.

Professional Consultant – Qualifications

For new build properties the Society will accept certification from an experienced Professional Consultant (e.g. architect) who holds appropriate qualifications and an adequate level of Professional Indemnity insurance (PII) cover.

The Society will accept the following ‘Professional Consultant’ for inspection of construction purposes:

1. An Architect registered with the Architects Registration Board (ARB);
2. A member of the Institute of Architectural Technologists (MCIAT);
3. A fellow (FRICS) or member (MRICS) of the Royal Institution of Chartered Surveyors; This can include both Chartered Building Surveyors and General Practice Surveyors;
4. A fellow or member of the Chartered Institute of Building (FCIOB or MCIOB);
5. A fellow or member of the Institution of Structural Engineers (F.I.Struct.E or M.I.Struct.E);
6. A fellow or member of the Institution of Civil Engineers (FICE or MICE).

Professional Indemnity Insurance (PII) Cover

The Society requires professional consultants inspecting properties for self build cases to hold appropriate PII cover.  At the time they issue their Certificate of Practical completion, in the Society’s required wording, the consultant must have professional indemnity insurance in place for whichever is the greater of either:

• Open market value of completed property; or
• Minimum of £500,000.

Any excess over £1,500 should be referred to your local branch office.

The Society will request from the professional consultant a letter (confirming they will inspect from commencement through to completion and that the Society is relying on their certificate) along with a copy of the PII schedule of insurance  prior to the Offer of Advance being issued.

A copy of the Certificate of Practical Completion along with a copy of PII cover must be received from the professional consultant prior to release of final stage payment.

Property types and location

The Society will consider properties of standard construction of any age subject to a satisfactory report from a valuer.  Where a new self build property is under construction, stage payments may be released after inspection. Stage payments may also be considered on properties, which are being renovated and/or extended.

The Society only lends in Northern Ireland.

In the absence of a management company flats/apartments are not considered suitable security because of the potential for ongoing maintenance and insurance problems.

The Society does not normally consider lending on properties with a purchase price or valuation less than £75,000.  Referrals may be made to your local branch office.

For leasehold property the lease should have a minimum of 50 years to run after the mortgage term is due to end.

The Society does not consider lending on properties with flying or creeping freehold or freehold flats/apartments.

Remortgage

Free Standard Legal Fees (Society’s Solicitor acting) or a cash back:

Where the Society’s product range includes a remortgage product with either free standard legal fees (using the Society’s allocated Solicitor) or a cash back the following guidelines should be applied:

Free Standard Legal Fees (via Society’s Solicitor):

• Re-mortgage to replace existing borrowings only;
• Re-mortgage to replace existing borrowings plus additional borrowings.

Re-mortgage outside agreement for free legal fee cases: **

• Re-mortgage plus transfer of equity;
• Re-mortgage plus change of name e.g. applicant has married since mortgage with current lender incepted and now wishes to change name;
• Applicant using their own legal representation.

**The Society’s Solicitor is prepared to do the standard re-mortgage work, as they are acting for the Society, and then separately take instructions from the applicant(s) and act for them in respect of this additional work.  The Society’s Solicitor should be instructed accordingly and an invoice for additional work sought and agreed.

Remortgage with cash back (Applicant(s) using own Solicitor):

Where the Society’s product range includes a remortgage product with a cash back (instead of free standard legal fees with Society’s Solicitor) the following guidelines should be applied:

Once the case completes and the customer is due their cash back the Society will withdraw a cheque payable to the applicant(s) and forward to them by post or arrange for collection.

Rental income

The Society will consider 50% of rental income in the Affordability Assessment.  The Society will require proof of rental income by means of a copy tenancy agreement and proof of rental payments being received into a bank account.

Residency

The applicant(s) must be living in the UK for a minimum of 3 years.  See also ‘Non-EEA foreign nationals’.

Residency

The applicant(s) must be living in the UK for a minimum of 3 years.  See also ‘Non-EEA foreign nationals’.

Applicant(s) should also be resident and working in Northern Ireland for a minimum of 6 months at time of application.

Residency – proof of residency

Where applicants are not recorded on the electoral roll it is necessary for proof of residency to be provided (e.g. utility bills bearing applicant(s) name and address).

Self Build

The Society will consider lending to finance self build projects.   The maximum LTV for self build mortgages is 75%.

The earliest point the Society will consider lending for a self build is where the foundations have been laid and have been inspected by Building Control.

We will not consider it acceptable to lend on a site purchase only.

For all applications to finance a self build project the Society will require the following additional documentation:

1. Copy of site map;
2. Copy of Planning Permission/Building Control documentation*;
3. Final drawings/plans (to be provided to the Society’s local branch office for review by the valuer);
4. Details of building warranty provider (e.g. professional consultant inspecting the new build property).

*There should be at least 1 year remaining on the Planning Permission.

The Society will not proceed where there are restrictive covenants on Title.

The Society will take into consideration the access to the property, the proximity of family land/agricultural or other outbuildings,  the cost of the build, the applicants’ other resources and the period of time the build will take to complete.

The advance may be released in stage payments as agreed with the local branch.  The first stage payment may only be released when the stage of construction has at least reached the stage where the foundations have been laid.

If a Professional Consultant is inspecting during construction of the build the Society will need to confirm if they have appropriate experience, the required qualifications and the necessary level of Professional Indemnity Insurance in place.  A copy of the schedule of insurance is required for approval.  The Professional Consultant must also agree, before the Society’s Offer is issued, to providing the Society with a final certificate, in the Society’s required wording, prior to release of the final stage payment.

The Society will require a copy of the valuer’s stage inspection report prior to release of any agreed stage payment.  Prior to release of the final stage payment we will also require a copy of the Professional Consultant’s final certificate, in our required wording.

Self Employed Applicants

If any of the following applies, the applicant(s) must be disclosed as self employed:

• Where the applicant(s) has a shareholding of 20% or more;
• If joint applicant(s) own 20% or more between them, treat both applicants as self-employed (both applicants need to hold a % share);
• A sub-contractor who derives income from more than one contract;
• An applicant(s) has a partnership interest in a business i.e. income is not PAYE, irrespective of the percentage shareholding;
• An applicant(s) owns a franchise;
• An applicant(s) employed by a Private Limited Company (LTD) who receives a salary (PAYE) and dividends as part of their remuneration package;
• An applicant(s) who is in a Limited Liability Partnership (LLP) and receives a share of Net Profit.

The applicant(s) must be self employed for 3 years and 3 years income documentation must be provided. If an applicant has been self employed over 2 years but not 3 the Society may accept 2 years self employment plus one year’s projected income.  A referral should be made to the Society’s local branch office where less than 3 years can be confirmed.

Solar panels

The Society has adopted the guidance provided by UK Finance (Northern Ireland) in relation to the installation of solar panels (photovoltaic PV panels) on properties offered for security.

Where the applicant(s) have purchased the solar panels outright the Society is prepared to lend on normal terms.

Where a Lease of Rights has been granted in respect of installation of solar panels the Society will not consider lending over 80% LTV.

Solicitors

The Society maintains a panel of solicitors with whom mortgages can be transacted.   If you have any queries please contact your local branch office.

Unearned income

The Society does not take unearned income into account when assessing affordability.  The only exception to this is in the case of pension income.  The Society will take a percentage of pension income in certain cases.  See section L ‘Lending into and in retirement’.

Valuation

A valuation report is a basic assessment carried out on a property which enables a lender to decide whether to lend on the property by assessing its condition and likely value. This basic valuation is for the Society’s benefit only.  The valuation fee, where applicable, should be paid with the Application.  The Applicant(s) should give consideration to requesting a more detailed survey such as a Homebuyer’s report and valuation or a full structural survey.

Working family tax credit (WFTC)

The Society does not accept WFTC as part of the affordability assessment.