Criteria

A DIP states how much we can lend and is valid for three months, subject to a valuation and the information supplied being correct.

The details of the customer’s bank account from where the mortgage will be paid should be keyed at application.

We'll require a Direct Debit mandate to be completed, signed and sent to us for all applications.

The Direct Debit must be set up from a personal current account in the applicant's name. We do not accept payments from a savings, third party or business account.

Applications involving finder's fees are not acceptable.

A finder's fee is a fee or commission paid by a seller to a third party (such as an investment club) for finding or introducing a buyer. It does not include the normal fee or commission payable to any estate agent handling the sale.

We’ll always collect the first payment on the 1st of the month in the month after the first full month after the mortgage completes. For example, if the mortgage completes on the 1st of June we’ll collect the first payment on the 1st of July. If the mortgage completes on the 2nd of June we’ll collect the first payment on the 1st of August.

The first payment is usually higher than the rest of the monthly payments. This is because it includes interest charges from the day we release the money to the end of the month, plus the first full monthly payment.

We’ll collect ongoing monthly payments on the 1st of each month. If the 1st falls on the weekend or on a bank holiday we’ll collect the payment on the next available working day.
 

How do you calculate the first payment?

The first monthly payment is made up of interest charges from the day we release the loan to the end of the month, plus the first monthly mortgage payment.

Example:

^*Note that in a leap year we’ll still calculate the payment using 365 days.

When will you tell the customer about this?

On the first working day after we release the money, we’ll write to tell the customer when we’ll collect their first and subsequent monthly payments.

The letter will also give a summary of other information we agreed when you applied for the mortgage, such as whether it’s an interest-only mortgage, a repayment mortgage or a combination of the two. If the mortgage account is made up of different parts, the letter will also explain:

• how we have set these up; and
• how the monthly payments on each part make up the total monthly payment we’ll collect.

If we cannot complete electronic verification, we need to ensure that the customer is who they say they are from documents which confirm their identity and where they live.

Depending on the type of verification document provided, the customer will need to provide either one or two documents. FCA registered firms must ensure that documentation relied upon to verify aspects of a customer's identify is copied and retained. Sufficient and accurate information must be recorded on our application system. You must also correctly indicate if the case is face-to-face or non face-to-face.

We reserve the right to request copies of identity documents.

Two separate documents must be provided to verify the customer's name, residential address and date of birth.

Documents must be originals and can only be used once throughout the whole process; i.e. used once for either address verification or for identification.
 

Single Identification Documentation

Non Single Identification Documentation

If we ask you to provide ID documents, you must ensure that the following is present to satisfy certification requirements. This must be recorded by the FCA Registered Mortgage Intermediary:

• name of the certifier;
• signature of the certifier;
• date of certification, which must not be older than three months at the time of the application and;
• written confirmation from the certifier stating "I hereby certify that this is a true and correct copy of the original document as sighted by me" (variations are acceptable).

Documents must be certified by an FCA registered mortgage intermediary.

Permanent right to reside is required for all applicants on all applications which do not meet the following criteria:

• The customer (or either customer on a joint application) has lived in the UK for more than five years OR
• Loan to Value (LTV) is <=75% OR
• Sole applicant with an income of £75,000 or more. Joint applicants where one applicant has an income of £75,000 or more, or where the combined income of both applicants is £100,000 or more (e.g. this could be £60k and £40k, therefore no applicant has an income of £75,000 or more but together their income is £100,000 or more)

When proof of permanent right to reside is required a next step message will advise ‘Proof of permanent right to reside in the UK is required’ and this must be provided for all customers on the application.

If any of the criteria above are met the message will not show and the application can proceed without proof of permanent right to reside being required.

Permanent right to reside can include:

• As part of the EU Settlement Scheme EEA, EU and Swiss citizens, living in the UK by 31st December 2020 can apply to continue to live in the UK after 30th June 2021 and will receive one of two statuses which are both acceptable:
• Settled status (awarded where they have lived in UK for at least five years and also known as ‘indefinite leave to remain under the EU Settlement Scheme’)
• Pre-settled status (awarded where lived in the UK for less than five years and they can re-apply for settled status after five years continuous residence in UK has been reached)
• Indefinite leave to enter or remain
• Republic of Ireland citizens do not need to apply under the EU Settlement Scheme and have automatic permanent right to reside in the UK (no proof of permanent right to reside is required for ROI citizens).

Proof of permanent right to reside could be verified to one of the following:

• For EEA nationals an Immigration status ‘share code’ – customers who can view their immigration status online at gov.uk can provide a share code which lasts for 30 days and we can use this to view their immigration status e.g. settled or pre-settled status
• Please note only ‘immigration status’ share codes starting with an ‘S’ are acceptable and not ‘right to work’ or ‘right to rent’ share codes  
• Indefinite leave stamp in passport – including: Indefinite Right (or Leave) to Remain/Enter ; Right of Abode ; 'There is at present no time limit on the holder's stay in the United Kingdom'
• Biometric Residence Permit showing ‘indefinite’ rights to remain (this includes ‘indefinite leave to remain’, ‘indefinite leave to enter’ or ‘no time limit)
• Letter from the Home Office confirming indefinite right to remain in the UK.

To calculate the income of £75,000 or £100,000 we will include the total of all earned incomes or the latest year’s income for self-employed customers.

Applications from non-UK nationals holding diplomatic immunity are not acceptable.

We only accept income paid in Sterling.

In England and Wales, for properties in buildings that are five storeys or higher we will no longer require an External Wall System (EWS1) form in order to progress an application. We will also be able to consider applications on properties where cladding remediation work is required but not yet completed. This only applies to buildings five stories or higher therefore EWS1 forms may still be required for buildings four storeys or lower and for properties in Scotland or Northern Ireland. 

The surveyor will advise when an External Wall System (EWS1) form is required to confirm the status of the external wall system and any applicable attachments e.g. balconies on multi occupied, multi storey buildings.

It is the responsibility of the building owner and/or its agent (in Scotland individual customers have to source the EWS1 form) as the responsible person to:

Confirm that an external wall system (EWS) or attachments, such as a balcony, on buildings containing flats has been assessed by a suitable expert for likelihood of proportionate remediation to address fire safety risk.

The EWS1 form must be prepared by a suitably qualified independent professional advisor. Professional advisor must be a member of one of the professional bodies as listed by the RICS - List of professional bodies (DOC, 31KB). We will be unable to confirm if a property is acceptable until a valuation has been instructed.

For purchase cases a special condition will be added to a mortgage offer to instruct the conveyancer to advise the customer that the offer has been made on the reliance of an EWS1. It will also ensure that the customer knows that neither ourselves or surveying providers are liable for the information that was contained in the EWS1 form.
 

New Build

For New Build high rise blocks over 6 storeys/18m in height (England and Wales) or  4 storeys/11m in height (Scotland) Building Regulation compliance, The Building (Amendment) Regulations 2018 or local equivalent can be relied on, subject to the conveyancer receiving confirmation of this from the building owner, and/or its agent or duty holder. Where this cannot be obtained the above criteria applies.

The property must meet minimum criteria. Must be habitable, readily saleable, structurally sound and be able to have buildings insurance arranged upon it. The mortgage advance may be wholly or partially retained pending completion of works required to bring the property to a suitable condition for lending.

Property acceptability is based on a satisfactory valuation report from the bank's appointed valuer. Non-standard construction will be assessed on individual merit. Certain types of pre-cast reinforced concrete (PRC) construction are designated defective and may not be acceptable unless repaired.

Applications that involve a distressed sale or a sale and leaseback are not acceptable.

We will lend subject to the valuer confirming the property is suitable mortgage security and providing a present condition valuation figure. To assess the property the valuer will require a report outlining the issues and a quote from a treatment company who must either be a member of the Property Care Association or be able to offer a warranty backed treatment plan. If treatment is advised and where possible, then this is often over 3-4 years.

An initial occupancy/new build is any property being occupied and/or sold for the first time on the open market in its current state and includes converted and refurbished properties.

These will fall into one of four categories:

• newly-built property
• re-furbished property i.e. refurbishment of an existing residential property, typically a refurbished property will be considered as initial occupancy where the vendor is a builder/developer and the property has been vacated to allow for the refurbishment to be undertaken
• newly-converted property i.e. conversion of an existing non-residential property, e.g. an existing mill converted into flats
  A property, either new or converted (as above), that has been tenanted and is now offered for sale by the builder/developer
  
• maximum LTV on new build properties (houses and flats) is 85%. (75% for second home loans).
   

Property must be subject to one of the following requirements:

• subject to a Building Standards Indemnity scheme as listed below
• being sold by a Development Corporation or a Local Authority where the body concerned gives an acceptable guarantee
• a single detached property (either self-built or otherwise) where construction is monitored by a consultant employed directly by your customer
• a property built by a self-build group where construction is monitored by a consultant employed by that self-build group
• a property forming part of a small solely residential development comprising not more than 15 units in total where construction is monitored by a consultant employed by the builder or developer. (If flats/maisonettes are involved, each individual flat/maisonette counts as one property)
• developments containing more than 15 units need NHBC or another acceptable form of building standards indemnity.

All new build properties when being purchased for the first time must either have a warranty from a provider (see below for acceptable warranty providers), or a professional consultant's certificate in a format provided by UK Finance signed by a person with an acceptable qualification.

Where developments contain more than 5 units we may place a limit on the percentage of properties we will lend against on that particular site. Where the limit has been reached, the valuers will decline to carry out a valuation and will advise accordingly.
 

Acceptable Warranty Providers:

• ABC+
• Advantage HCI
• ARK Insurance
• Build Assure
• Building LifePlans Ltd (BLP)
• Buildzone
• Cadis
• Checkmate
• Compariqo
• FMB Insurance
• Global Home Warranties
• Homeproof (previously Aedis)
• International Construction Warranties (ICW)
• NHBC
• One Guarantee
• Premier Guarantee - includes the LABC New Homes Warranty and LABC Hallmark Scheme
• Protek
• Q Assure Build
• Thomas Miller
   

Confirmation of what warranty is in place is required. This should be received prior to offer.

Builder cash incentives include but are not limited to deposit contributions, cash-backs, contribution to legal fees/stamp duty, mortgage subsidies.

Builder cash incentives will typically be acceptable provided the value of these does not exceed 5% of the lower of purchase price/valuation. Cash incentives in excess of this amount may result in a reduction in the maximum loan available. All builder cash incentives must be declared at the point of sale.

All lending decisions are based on valuation or purchase price (whichever is lower).

If the purchase property address changes once a mortgage application has been made, and the customer’s original mortgage product has been withdrawn, a new product from the current range must be selected.

If the property being purchased is not changing but an amendment is required to the address keyed e.g. property number or street name this must be amended by us prior to completion. You should contact us to make this change.

Let’s your customer apply for a mortgage on a property to be used primarily as a holiday or second home.

• We will allow 1 residential plus 5 ‘other’ properties with Lloyds Banking Group (across BTL and Second Home Loan).
• We will consider a maximum portfolio value of £3m and a maximum LTV of 75%.
• We will not accept Right to Buy, Guarantor applications or Builders Incentive Schemes.
• Occasional letting is allowed up to a period of four months with special conditions placed on the mortgage. If the Second Home is for let for more than four months this will be treated as a consent to let.
• Income must cover all mortgage commitments and the additional expense of running second home properties.
• Minimum applicant age of 18 years.
• Applications where a tenancy agreement is in place between applicant and family member cannot be accepted - the mortgage can be used where a family member will occupy the property provided there is not a formal tenancy agreement.

• Intended to regulate development or proposed use of property.
• Range is varied but may include:
  • limiting occupation to a certain category of occupant - local residents, first time buyers, specified age requirement, specified employment types
  • restricting use of property - tied to agricultural use, restricting residential occupation to certain time limits, for example, 10 months of the year.
• The impact on acceptability depends upon the impact of the restriction. There may be a strong local demand for the property from qualifying purchasers.
• Broadly, restrictions that mean a property must be used for agricultural use will be unacceptable.
• The valuer will determine the impact on the suitability of the property for lending and the conveyancer will determine whether the purchaser/owner complies with the obligation, advising the bank of any issues that may impact the lending.
• Where the restriction limits the time a property can be occupied this will only be acceptable for holiday homes /second home loans and subject to the valuer confirming the property is suitable for lending.

Sub-sales and back-to-back transactions are not acceptable.

A sub-sale occurs when a property is bought and then sold on within six months, i.e. the borrower is buying the property from someone who has themselves bought the property less than six months before. The date of registration at the Land Registry is how we determine the length of ownership.

This means that the current vendor must have owned the property for at least six months before we can accept an application to purchase that property, unless the property has been inherited.

A back-to-back transaction is a type of sub-sale where the intervening seller buys from the original seller and sells on to the borrower on the same day or within a few days. We also regard as sub-sales, cases where the seller acquires the freehold (or superior leasehold) title to the property, which they then immediately sell on to the borrower by the grant to them of a lease (or sub-lease).

The following cases are exceptions where it is acceptable for the property to be sold on within six months of acquisition by the seller.

Where sales are by:

• a personal representative of the registered proprietor; or
• an institutional mortgagee exercising its power of sale; or
• a receiver, trustee-in-bankruptcy or liquidator; or
• a developer or builder selling a property acquired under a part-exchange scheme.

We will also accept Inherited properties where the applicant is a beneficiary but has not owned the property for 6 months. The conveyancer will be responsible for ensuring the application meets the acceptable criteria.

Applications which involve assignable contracts or irrevocable powers of attorney in favour of intervening sellers are not acceptable. Any other structure to the transaction which has a similar effect should be reported to us.

• We do not lend on freehold flats unless freehold reversion/Tyneside arrangements apply and there are no more than four flats in the building. In addition we accept Coach house freehold flats where the garages underneath are subject to a long lease.
• For leasehold property there must be a minimum of 70 years remaining on the lease at application. Shorter lease terms are only accepted on certain central London estates and subject to specific criteria.
• Commonhold property is not accepted.

Each application will be assessed on its own merits although there are some property types which are specifically excluded.

Further advice can be found here.

• Timber or metal framed buildings where the cavity, between frame & cladding, has been retrospectively filled with an insulation material.
• Concrete walls as built in Cornwall or Devon before 1950 (1960 for postcodes PL12, 13, 14, 15, 17, 18, 22 & 23) where valuer has recommended a Mundic report and test of the concrete has classified the concrete in either class B or C.
• Unrepaired, designated defective properties under the Housing Act 1985, Housing (Scotland) Act 1987, Housing (Northern Ireland) Order 1986.
• Flats or maisonettes of large panel system type unless acceptable structural appraisal on the whole block.
• Load bearing panels of asbestos or gypsum plaster construction.
• Properties which are structurally unsound and properties which are uninsurable.

• Property must be assessed as an individual residential property intended for owner occupation.
• Farms or property with land that is subject to commercial agricultural use, commercial property and timeshare are not acceptable.
• Limited incidental business use may be acceptable subject to property retaining residential status.
• Live/work schemes may be acceptable on mainstream lending only subject to compliance with planning condition and ‘work’ element using less than 40% of the property.

The minimum valuation amount for all lending is £40,000.

Before we can make an advance, we must have a mortgage valuation that takes into account any factors likely to materially affect the value.

The valuation figure is currently valid for 12 months.

Properties for sale in England, Wales and Northern Ireland must have an Energy Performance Certificate which details the energy rating of the property. The Energy Performance Certificate is not a replacement for a valuation or property survey.

In Scotland, most sellers must provide a Home Report, part of which will include a survey (Scottish Single Survey) and may include a Generic Mortgage Valuation Report (GMVR) which the purchaser and any eventual Lender may rely on.

Where an application relates to a property still being constructed, the valuer will provide a valuation figure based on the assumption that construction is completed to a satisfactory standard.

The appropriate Special Condition will be included in any Mortgage Offer.

For full details about the cost and types of valuation available through our surveyors, visit Charges and Valuation Fees

Scottish Widows use affordability as a way of assessing how much they will lend. 

When calculating affordability, the following Loan to Income (LTI) caps also apply. These can be used to calculate the maximum loan that would be available based on income but these are caps and the actual maximum loan could be lower and can be impacted by loan to value and credit score.
 

Please note:

If there is any element of self-employed income on an application and the application income is up to £75k, a maximum LTI of 4.49x will apply. For loans where the application income >£75k, and there is any element of self-employed income, the normal 5.50x maximum LTI applies up to 75% LTV. For loans >£500,000 to £750,000 of 85.01% to 90% LTV and for loans >£750,000 to £1m of 75.01% to 85% LTV a 4.00x LTI will apply.

The level of credit score achieved and overall credit profile may restrict the LTI applied ; this may be restricted to 4.49x, 5.00x rather than 5.50x shown and if income >£75k and loan >£500k where 4.49x shows this may be restricted to 4.00x.

When calculating affordability on interest only loans, Scottish Widows Bank will take into account the monthly premiums payable for the relevant repayment vehicle i.e. existing endowment or new or existing ISA. Please ensure the premium(s) is specified at both DIP and full application.

For some customers we may make a deduction within our affordability calculation to allow for financial planning commitments the customer may have going forward.

Within our affordability calculation we may apply an affordability adjustment for some contractors to take into account likely business expenses.

Affordability must also include future changes to income and expenditure.

Where the maximum loan available is below that requested there may be the option to extend the term (up to retirement) or extend term into retirement (subject to evidence of adequate retirement income).

Please note, if the maximum loan available is reduced due to income not being evidenced at the declared level then the loan amount must be reduced accordingly.

In some circumstances we may deduct credit commitments as ongoing in our affordability calculation even when customers have declared an intention to repay these. If the maximum loan available is reduced as a result then the loan amount must be reduced to proceed.

Only in the below scenarios may we consider a loan amount above the maximum loan from our affordability model:

• Existing Scottish Widows Bank mortgage customers with no increase in in loan amount or loan to value (LTV) compared with their current mortgage (see Existing Customers).
• There is additional income, not previously considered, that is expected for the life of the mortgage and can be evidenced in line with our requirements.

Applications which involve assignable contracts or irrevocable powers of attorney in favour of intervening sellers are not acceptable. Any other structure to the transaction which has a similar effect should be reported to us. Assignable contracts allow the original buyer to sell the property before legal completion, by assigning the contract to buy the property to a new buyer after contracts have been exchanged with the developer.

The Bankruptcy question should be answered as yes if your customer has had a bankruptcy/IVA/Debt Management Arrangement or Debt Relief Order within the last 6 years or still have an outstanding Bankruptcy Restriction Order.

CCJs are generally taken into account in credit scoring however, background details are required.

All applications will be credit scored. If an application is declined as it has not passed the credit score customers have a right to appeal and whilst we’ll always reconsider carefully, without new information it is very unlikely that we will be able to change our decision.

This also applies where an application is declined on policy because of ‘the level of unsecured debt outstanding’ or because ‘an active pay day loan is present’.

Please give careful consideration before submitting an appeal for assessment. The list below provides guidance on the scenarios in which an appeal may be successful:

Existing Scottish Widows Bank Mortgage Customers

Moving house with no increase in loan amount or loan to value (LTV) compared with the current mortgage.

BFPO Address

The client is in the British Armed Forces and living at a BFPO address.

Victim of Fraud

The fraud has been reported to the Police and Credit Industry Fraud Avoidance system (CIFAS) and can be evidenced by a crime reference number.

Adverse Credit Data Registered in Error

An error by Lloyds Banking Group can be evidenced.

If the adverse information has been registered on a non-Lloyds Banking Group product an appeal cannot be submitted and the customer should arrange for their records to be corrected before a new application is submitted.

For scenarios that fall outside of this list it is likely the final decision will remain unchanged.

All customers must make a minimum personal deposit for the property relevant to their individual credit score, product or scheme. No element of this deposit should be represented by a personal loan.

Where evidence of deposit is requested, the following documents are acceptable:

Gift from family

You should obtain a letter written by the family member that includes all of the following:

• addressed to Scottish Widows Bank
• dated within the last three months
• name and address of the person(s) gifting the deposit
• name and address of the applicant(s)
• the relationship between the person(s) making the gift and the applicant(s). They must be a family member.

See definition of family member below

• the property address being purchased
• the amount of the deposit being gifted
• the source of the gifted deposit e.g. savings
• the gift is 'not repayable' and the person(s) gifting the deposit 'will hold no interest in the property following completion of the mortgage'
• signed by the person(s) gifting the deposit

A Gifted Deposit (PDF, 419KB) template letter is available for you to use in the Literature page.

You should also provide a UK bank statement or UK passbook from the family member or applicants, showing the deposit funds in their account. Alternatively, the family member or applicant may provide a letter from their UK bank confirming that the funds are available. Additional statements may be requested where required.

If any of the deposit is gifted, this should be chosen as the source of deposit when keying the application.

The definition of a family member is someone who is related to at least one of the applicants:

• by birth/blood relative (for example an aunty has to be via blood and not marriage)
• by marriage or civil partnership (including step children, adopted children and in-laws)
• as 'Common Law' partners or co-habitees.

Gifts from friends or employers, developers/landlords, cousins, or foster/guardian children are not acceptable.
 

Savings

You should obtain:

• the latest three months' UK bank statements or a UK passbook covering the latest three months' transactions showing the applicant's name, account details (sort code and account number for bank statements or account number for passbooks) and company name, or the latest annual statement for longer term savings plans
• the statements or passbook should be in the name of at least one of the applicants
• the latest closing balance must cover the total deposit required
• any recent large or unusual deposit may require clarification to establish the source.

Vendor Deposits and Cashbacks (Non New Build Properties) - Vendor Gifted Deposits are an unacceptable source of deposit for any non new build property.

This does not impact buyers who are receiving gifted deposits to purchase New Build Properties or concessionary purchases.

We do not currently accept new business applications from Expat residents.

All loans arranged where the capital element is not included in the monthly payment, including those that are part capital and interest repayment, part interest only, must have a plan in place to repay the capital at the end of the term. This includes new loans, further advances and product transfers.

As a responsible lender, it is important for us to see evidence of the repayment plan for interest only mortgages so documents relating to the repayment plan must be received before a new mortgage offer can be considered.

You can see a list of our current acceptable repayment plans on the interest only criteria section.

Maximum LTV: 90%.

The following restrictions apply for borrowing above £750,000:

• >£750,000 to £1m 85%
• >£1,000,000 to £2m 80%
• >£2,000,000 to £5m 75%
• >£5,000,000 50%

New build properties - 85%.

The maximum loan amount available on an interest only basis is 75% LTV (or for sale of mortgaged property (SOMP) main residence 50%, 60% or 75% depending on the minimum equity requirement).  

On part interest only/part capital and interest repayment customers can borrow up to 85% LTV with the balance on capital and interest repayment.  

Over 85% and up to 90% LTV the full balance must be on a repayment basis.

Further Advances are available up to 85% LTV, based on the current value of the property. Existing customers will not be considered for a Further Advance until 6 months have elapsed since completion of the original mortgage.

• Minimum term: 5 years.
• Maximum term: 40 years, or to age 80 if less.

If the mortgage term extends beyond the lower of either a maximum working age of 70 or anticipated retirement age, we will assess affordability on both current sustainable income and expected retirement income.

• Minimum age 18 years.
• Maximum retirement, unless retirement income meets affordability rules.

The maximum age at the end of the mortgage term is 80 years for repayment mortgages, and 70 if any part of the mortgage is on interest only.

Applications where previous mortgages have been in arrears will be considered on an individual basis.

• Maximum of four applicants.
• Two incomes are taken into account for affordability.
• Discretion can be used if third income is required.
• For Bonus/Cash/Sale Of Mortgage Property interest only repayment plans, only the income from the first two applicants will be used to determine the income qualifying criteria.

Simultaneous sale and purchase is the preferred route, but we recognise that this is not always possible.

Existing property is for sale but will not be sold before new mortgage completes

• The existing mortgage payment must be keyed as a credit commitment and will be included in the affordability calculation.

Existing property to be rented out

• The mortgage payment must be keyed as a credit commitment (the mortgage type for the commitment needs to by keyed as ‘Buy to Let’). The rent received should be keyed as 'Rental Income (if rental property)’.

Foreign currency income will not be accepted for new mortgage or remortgage applications for new and existing customers, including porting, transfers of equity and further advances.

The only exceptions to this are further advance applications, for essential repairs to the mortgaged property, and product transfers.

Foreign currency income is any income other than sterling received by a customer. Foreign currency income paid into a UK bank account and subsequently transferred to sterling is still considered to be foreign currency.

Sub-contractors, fixed/short term contracts and agency workers

Applications will be considered from the above employment types if the customer has a current continuous employment of 12 months or more with six months of the contract remaining or the customer has two years continuous service in the same type of employment.

Evidence of their employment track record may be required.

Customers should be treated as self employed if they pay their own tax or sub contract to more than one company.

IT and other contractors

All applicants must have a current continuous employment of 12 months or more with six months of the contract remaining or two years continuous service in the same type of employment. For IT contractors on any income and other contractors whose income is more than £500 per day or £75,000 per annum: whether employed or self-employed, we accept the gross value of the contract as evidence of income.
 

Construction Industry Scheme Contractors (CIS)

Applications from customers employed on a Construction Industry Scheme (CIS) Contract will be considered. An average of the latest three months income should be used and evidence of the income for these applicants must be provided.
 

Zero hours contracts

Applications from customers employed on a zero hours contract will be considered where the customer has been employed on a zero hours contract for a minimum of 12 months. If the customer has been employed on a zero hours contract for less than 12 months, the application should be declined unless there is alternative income or sufficient income from an additional applicant. This applies even if the customer was previously employed on a guaranteed hours contract.

The total of the last 12 calendar months income only will be used and all the income must be evidenced.

Where the customer has been employed on a zero hours contract by different employers but for the same type of work, this can be considered continuous employment, and income documentation for 12 months will be required.

Where the customer is employed by a nursing bank on a zero hours contract then the Nursing Bank Policy should be followed; refer to Employment Types.

Probation

Income from probationary employment is only used where the probationary period is part of a permanent contract. If the contract is purely probationary with the employer having the option to terminate the contract then this income cannot be used.

It is important that probationary contracts are keyed accurately as follows:

Where the applicant receives an offer of permanent employment and the contract states an initial probationary period e.g. three or six months, it should be keyed as 'permanent'. The income will be used in the affordability assessment.

Where the applicant is offered a probationary contract, e.g. for three months, at the end of which the employer has the option to determine if a permanent contract will be offered, it should be keyed as ‘probationary’. The income will not be used in the affordability assessment.

Professional Sports People

Applications will be considered from Professional Sports People where either continuous employment of 12 months or more with six months of the contract remaining or two years continuous service (for the last two years as at the date of application) in the same type of employment can be confirmed.

It is essential to establish that such individuals will have the ability to sustainably meet the monthly repayments as they near the end of their career or if their career should be ended abruptly due to injury.

Funding from corporations/charities/sponsors is not an acceptable form of income.

The maximum age at the end of the mortgage term is 80 years for all lending.

Future retirement income will need to be verified where the customer is taking a mortgage term which extends beyond their anticipated retirement age or a maximum working age, for which we will use 70, whichever is the earliest. Affordability will be assessed on the future retirement income. On occasions, a further review will be required to confirm we feel it is appropriate for the customer to lend into retirement.

The applicant’s plans should be discussed in view of their occupation, and reasonability of working beyond state pension age should be documented where appropriate.

The types of evidence which can be used to verify anticipated retirement income are as follows:

• Private / Company Pension Forecast Statement dated within the last 18 months.
• State Pension Statement dated within last 18 months which must be obtained by the customer directly as an actual statement with their name and address on it (this can be obtained from The Pension Service).
• State Pension Forecast statement issued to the customer directly from The Pension Service with their name and address on it. Annuity Statement dated within the last 18 months.

The types of evidence which can be used to verify Pension Income already being received are as follows:

For State Pension, War Pension and Widows Pension

• Latest month’s bank statement.

For Company or Private Pension

One of the following:

• latest payslip
• latest bank statement
• latest pension statement/reference dated within last 12 months.

• Employed - Current employment details collected.
• Self-Employed - three years history requested however, where the business has been trading for less than three years e.g. one year self-employed and so self-employed income is not available for three years, we will still consider these applications. You must record all relevant years' income accurately on the mortgage application.

In cases where the customer has more than one job, we’ll consider the following when deciding whether or not to take the secondary income into account:

• hours worked - are they sustainable?
• are the roles/skills similar?
• what is the distance between the jobs and the customers home?
• how long has the customer been in both jobs?
• is the salary consistent with the type of employment?
• the number of days the customer works per week.

If any of the following applies, the customer must be keyed as self-employed:

• where the customer has a shareholding of 25% or more
• if joint customers own 25% or more between them, treat both customers as self-employed (both applicants need to hold a % share)
• a sub-contractor who derives income from more than one contract
• a customer has a partnership interest in a business, i.e. income is not PAYE, irrespective of the percentage shareholding
• a customer owns a franchise
• a customer employed by a Private Limited Company (LTD) who receives a salary (PAYE) and dividends as part of their remuneration package
• a customer who is in a Limited Liability Partnership (LLP) and receives a share of Net Profits.

For applicants who are classed as self-employed, you should capture all of their income under the field ‘net profit’. Whilst some self-employed income we allow is not truly 'net profit', we use this field in our affordability assessment and in our policy rules. For example if the customer is paid PAYE and dividends this can be added together and keyed in the ‘net profit’ field.

Where the applicant has been self-employed for two years or more, the full two years income documentation must be provided.

We will accept self-employed incomes which include government Self Employed Income Support Scheme (SEISS) grant income.

The income level used in our affordability calculation will be the lower of the latest year or the average of the last 2 years. 

A maximum LTI of 4.49x will apply on some applications where there is any element of self-employed income.

Acceptable Income Verification Documents

Latest two years’ HM Revenue & Customs (HMRC) Tax Calculation accompanied by corresponding Tax Year Overviews – The year the Tax Calculation relates to and the Customer’s name/initials must show. Tax Calculations can be obtained from the customer’s online self-assessment account.

The following details must be visible on the online Tax Calculation:

• HMRC logo
• Unique Tax Reference (UTR)
• customer’s name
• Tax year (most recent no older than 18 months old), and the following wording:
  • "This is a copy of information held on your official online SA tax account with HMRC", and
  • "Submission is 100% complete."

Online tax assessments produced by accountants’ commercial software (accompanied by corresponding Tax Year Overviews) are acceptable provided they show the following:

• Unique Tax Reference number
• customer’s name
• tax year (most recent no older than 18 months old).

Tax Year Overviews – corresponding Tax Year Overviews must accompany Tax Calculations. The tax due for each tax year must exactly match the corresponding Tax Calculation figure for Income Tax and National Insurance due.

Latest two year's full accounts – must be finalised and clearly show the net profit (for Sole Traders), share of net profit (for Partnerships) or salary & dividends (for Directors of Limited companies). Profit & Loss statements alone are not acceptable.

The year end on all documentation must be the most recent and must not be dated more than 18 months before the date of application. Tax Calculations from the customer’s online self-assessment account. Tax Calculations must be accompanied by corresponding Tax Year Overviews and the figures for tax due must exactly match.

In addition for all self-employed incomes the latest three months' bank statements for the account which is used for business purposes may be required.

Projected income will be considered for doctors, dentists, solicitors (including LLP) and accountants (including LLP).

Where the mortgage has been at least one month in arrears within the last three months, a further advance application cannot be accepted.

The customer should be advised to bring their account up to date and be ‘arrears free' for at least three months before re-applying.

This rule also applies to any standalone product transfers that you may wish to process, however, you can process the product transfer as soon as the account is up to date with no requirement to wait three months.

Tracker rates are linked to the Bank of England bank rate. This is announced by the Bank of England's Monetary Policy Committee (MPC). If the MPC decides to change the bank rate, we will change the tracker rate in line with it. This will be within 30 days of the publication of the minutes of the MPC meeting at which the decision to change the bank rate was made.

At the end of the tracker rate period the tracker rate mortgage will cease to be a tracker rate mortgage and we will charge your client interest at Scottish Widows Bank standard variable rate.

All variable rates are stated at their current levels and are subject to change.

Customers can apply for Consent to Let their property. If agreed, there is a fee of 0.5%. This fee is charged annually for short-term letting arrangements (not applicable for existing buy to let mortgages).

The 0.5% is calculated on the total outstanding balance of the mortgage, including any further drawdowns, as at the 1st of the month in which consent is granted. The fee is non-refundable, even if the property is let for less than 12 months or the mortgage is redeemed in full.

To apply for consent to let, customers must complete the Consent to Let Application Form (PDF, 538KB) and return this to us.

A consent to let would not normally be considered until the mortgage has been in place for six months (armed forces personnel are exempt from this rule).

We offer different types of mortgage products with different interest rates. With some of these there may be a charge if the customer repays all or part of the loan within a certain period of time.The Mortgage Illustration and offer letter give details of any early repayment charges that apply.

Why do we charge them?

We charge them because when setting up the funds to provide loans to customers, we expect them to keep the money for the time agreed at the outset. There is a cost to us if they repay some or the entire loan sooner. The charge compensates us for this cost.

When do we charge them?

A fee will be charged if the customer repays the loan while an early repayment charge is still present. Details of the charge percentage and end dates are detailed in the Mortgage Illustration and offer letter.

If the customer repays part of the loan on which an early repayment charge applies, we’ll charge them a proportion of the early repayment charge due.

We’ll also make an early repayment charge if we agree to transfer all or part of the loan to a new mortgage product during the early repayment charge period.

Are there any exceptions to this?

Yes. Currently with our fixed rate products, as a concession, each year the customer can make a single overpayment of up to 10% of the amount outstanding without having to pay an early repayment charge.

If the amount you overpay exceeds 10%, or the customer makes any additional overpayments, we’ll only charge them an early repayment charge on the proportion they overpay above 10%, or as additional overpayments.

With our variable rate products (including our Standard Variable Rate) there are no early repayment charges.

Where the loan is divided into more than one part, the concession will apply to the amount owing on each part.

Remember, we can change or withdraw our 10% early repayment charge concession, so if the customer decides they want to make regular or lump-sum overpayments, it’s always a good idea to contact us and check if the policy has changed. We will give at least three months’ notice before withdrawing or reducing the concession.

If the customer is moving home and can take the product with the early repayment charge with them to a new mortgage, they may not have to pay the early repayment charge.

The list of acceptable reasons are as follows:

• consumer goods
• debt consolidation
• gift to relative
• home improvements
• investment purpose (restriction - not for currency speculation or the purchase of stocks and shares)
• purchase freehold - (conveyancer required)
• purchase additional land adjacent to property (conveyancer required)
• purchase extension to lease - (conveyancer required)
• repay subsequent charge.

Existing Scottish Widows Bank Customers Moving Home

If the maximum loan available on affordability for a new application is below that required the application can still proceed on the loan amount required if all the below criteria are met:

• Loan Amount - No increase in borrowing (new mortgage loan amount must be less than or equal to the existing mortgage balance)
• Monthly Payment - New monthly payment no more than 5% above existing payment
• Term - No increase in term for Interest only applications. For a full repayment application the term can increase, provided the new mortgage is not Lending into Retirement
• Arrears - No current arrears on existing mortgage
• LTV - An increase of up to 10% in loan to value (LTV) is acceptable, where the new LTV does not exceed 60% LTV (e.g. 45% to 55% LTV is allowable). Where the new LTV is above 60% there can be no increase above the existing LTV. The existing mortgage LTV can be calculated based on the sale price of the property rather than the indexed valuation
• Repayment Basis - No changes allowed
• Affordability - Maximum income multiple of 4.75x

There will be no discretion to proceed outside of these criteria.

Customers named on the new mortgage application must be the same as those on the existing mortgage.

Please ensure you consider the full financial circumstances of the customer before submitting an application.

Lump sum or regular overpayments can be made at any time. If early repayment charges apply to the product, refer to early repayment charges for more details.

You can’t make regular overpayments on a fixed rate product.

It is sometimes possible to take a product with you to a new mortgage. We call this ‘porting’. The Mortgage Illustration and offer letter will say if any products are portable.
 

What does 'Porting' mean?

Porting means taking a product to another mortgage with the same lender, so there’s no early repayment charge.

The customer may be able to port the product and early repayment charge to the new mortgage for the amount they owe on the product they are porting. But if they are borrowing more, they’ll need to have a new product for the extra amount they borrow.

If they are borrowing less than the amount they owe on the product they are porting, and the offer they have for their old mortgage says there is an early repayment charge, then they will have to pay an early repayment charge on the difference.

When will the customer not be able to port?

We’ll decide whether to offer a new mortgage based on our lending policies at the time the customer applies. If we don’t offer a new mortgage, the customer cannot port their product. Also, if the customer repays their existing mortgage, they will still have to pay early repayment charges.

What if the customer can't repay their existing mortgage at the same time?

If the customer intends to sell their current property but can’t take out a new loan and repay the existing loan at the same time, they can ask permission to have two loans with us for a short time.

We’ll agree to this if we think they can afford to pay the monthly payments on both loans. They may be able to take their existing product to the new loan. However, they will have to transfer the existing loan to the lender variable rate that applies to the existing loan until the sale is complete and they have fully repaid the loan.

This is a concession that may not always be available.

Other rules apply if the customer wants to let their existing property.

What if the customer needs to repay their existing mortgage first?

If the customer sells their property, but they’re not ready to buy another, they’ll need to repay their existing mortgage. This means they’ll have to pay any early repayment charges that apply.

However, if they submit a new mortgage application with us within 90 days of repaying the existing mortgage, they can apply for a refund of the early repayment charge once the new mortgage has started. In this scenario they would need to select a new rate from our current range, and if the new loan is for a reduced amount, the early repayment charge refund will be pro-rata. This concession may not always be available.

The Product Transfer will take effect from the 1st of the month following the month in which the application and all required documentation are received.

If an existing mortgage is already FCA Regulated then it will stay FCA regulated regardless of a further advance or product transfer.

If, however, a mortgage is non-FCA regulated and a further advance is required, to give the client the regulatory protection for the entire mortgage, the existing debt is refinanced to make the whole mortgage FCA Regulated.

Please note that a standalone product transfer would not make the mortgage regulated.

If a SCG is present contact you if there is a problem with the SCG type or problems in obtaining a Letter of Postponement (LOP).

If any of the following SCG reasons are present the further advance cannot proceed:

• bankruptcy inhibition
• bankruptcy order
• creditors notice
• drug trafficking offence
• receiving order
• sequestration.

If the SCG is registered to a non-clearing bank and is to be repaid, a conveyancer must be instructed.

If the client does not intend to repay the SCG using the further advance and will therefore continue after completion, The Bank will request a Letter of Postponement (LOP) from the SCG lending company. If the LOP is not granted the further advance cannot proceed. It is not unusual for the SCG lending company to refuse to grant an LOP.