Mortgage Criteria

Criteria

Residential First Homes Right to Buy Help to Buy Shared Ownership

Our mortgage criteria’s are designed to help your customers with unique circumstances who would benefit from a more human underwriting approach. This includes those with complex income, self-employed, young credit history, and those who have experienced previous financial blips. 

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Table of Contents

Applicant criteria

Minimum age:

  • 21

Maximum age:

  • 75 at end of term
  • For joint applications the age of the oldest applicant is used
  • The term cannot extend beyond the applicants stated retirement age

Maximum applicants:

  • 2

Guarantors:

  • Not accepted

First-time buyers:

  • Accepted

Marital status:

  • Applications from married/civil partnership applicants must be in joint names

Defaults:

  • None registered in the last 6 months. Subject to review of a DIP submission, we will consider accepting CCJs or Defaults that will have been registered for over 6 months at the point of mortgage offer
  • On Pepper 24, 18, 12 and 6 products we will ignore 2 individual defaults (per application) up to and including £200.00 each where these defaults relate to utilities, communications or mail order providers. On Pepper 36 products we will ignore 1 individual defaults (per application) up to and including £200.00 each where these defaults relate to utilities, communications or mail order providers

CCJs:

  • None registered in the last 6 months. Subject to review of a DIP submission, we will consider accepting CCJs or Defaults that will have been registered for over 6 months at the point of mortgage offer

Mortgage / Secured loans:

  • Arrears status of 0 in last 6 months
  • None missed in the last 12 months

Unsecured commitments:

  • Fixed Term – Fixed Term Agreements – No missed payments in the last 6 months
  • Revolving credit – Missed payments considered

IVA & Bankruptcy:

  • Bankruptcy Range: Accepted when discharged more than 3 years ago
  • Standard Range: Accepted when discharged more than 6 years ago

Pay day loans:

  • Accepted where the account closed more than 12 months ago

Repossessions:

  • Accepted where repossession occurred more than 6 years ago

Debt management plans (DMP)

DMP Products

For active DMPs or those satisfied in the last 12 months; see selected products in our residential range

  • The following criteria applies:
  • Must have been active for a minimum of 12 months
  • Must be able to provide proof of satisfactory payments from DMP provider
  • If active, doesn’t have to be repaid at completion
  • For remortgages, capital raising can be considered to clear the DMP
  • No more than 1 active DMP per application

Standard Products

  •  Accepted if satisfied over 12 months ago

Residential status:

  • 3 years’ UK residential address history required for all applicants

Visa Requirements:

Accepted subject to:

• 3 years UK residency

One Applicant MUST have indefinite leave to remain. Additional applicants must have Indefinite leave to remain OR Right to Reside with acceptable visa type:

  • EU Settlement Scheme (EUSS) – Pre-Settled Status
  • EU Settlement Scheme (EUSS) – Settled Status
  • Leave to Remain
  • Family Visa
  • Skilled worker visa
  • UK Ancestry Visa
  • Health and Care Worker visa
  • British National (Overseas) visa
  • Intra company transfer visa

Visa’s must have a minimum 12 months validity.

Applicants holding a Visa without indefinite right to remain will not have their income used for affordability purposes.

Diplomatic immunity:

  • Not accepted

Income criteria

Minimum earned income:

  • £18,000 per application

Foreign currency:

  • Not accepted

Employed:

  • Minimum of 3 months in current job with 6 months’ continuous employment
  • Day rate contractors accepted subject to being in a contract and able to demonstrate a minimum 12 months history. Calculate the income as the lower of 12 month average day rate amount or current contract day rate x 5 (days per week) x 46 (working weeks)
  • Contract employees considered provided 12 months employment with the same employer together with confirmation the contract will be renewed
  • 3 months payslips (or 6 weeks where paid weekly) and P60 where applicable
  • Applicants in a probationary period not accepted
  • Zero hour contracts acceptable if a permanent position with 2 years+ at same employer and stable income levels
  • Income from seasonal/temporary work not considered
  • Directors with a shareholding of more than 25% will be underwritten as self-employed
  • Payslip evidence of the last 2 years Bonus / Commission where paid annually or bi-annually or quarterly
Income typeProportion considered
Basic salary100%
Car allowance100%
Monthly Bonus / Commission100%
Overtime100%
Annual or Quarterly Bonus / Commission 50%
Rental50%

Self-employed: Limited Company

  • Last 2 years’ Limited Company accounts, unless only 1 year available due to trading period. Minimum trading period of 12 months
  • 3 months’ business account bank statements
  • SA302s will only be acceptable in addition to the full business accounts. SA302’s are not acceptable proof of income on their own but will be requested where the accounts have been prepared by an accountant who does not appear on our list of accepted qualifications. We may also request them to confirm dividends which do not appear in the business accounts

Additional remuneration considered where applicants own 100% of the company:

  • Directors’ car allowance
  • Directors’ pension contributions
  • Use of home as an office
  • Private health insurance

Where additional remuneration is to be added back, finalised accounts will be required

Self-employed: Sole Trader/Partnership:

  • Last 2 years’ SA302s, unless only 1 year available due to trading period. Minimum trading period of 12 months
  • 3 months’ business account bank statements
  • SA302s may be requested to support company accounts

Retired:

  • Private pension and state retirement pension (SRP) are accepted

Pension income:

  • State retirement pension (SRP) – latest annual pension statement or award letter
  • Private pension – latest annual pension statement or award letter

Secondary/additional income:

  • Employment/self-employment income from a maximum of 2 sources per applicant considered
  • Benefits and maintenance may be included as additional income. Maintenance & benefit detail as described under ‘Documentation’

Residential Loan Criteria

Maximum LTV:

  • Up to £1 million available to 75% LTV
  • Up to £750,000 available to 85% LTV

Maximum term:

  • 40 years

Minimum term:

  • 5 years and 1 month

Minimum loan:

  • £25,001

Maximum loan:

  • Up to £1 million available to 75% LTV
  • Up to £750,000 available to 85% LTV

Maximum lending with Pepper:

  • Maximum lending of £4m per applicant, including any joint loans the applicants are party to
  • Can be a mixture of Buy to Let and Residential loans

Remortgage applications:

  • Accepted where applicant has been the registered owner for the last 6 months at application

Repayment:

  • Capital & interest
  • Interest only to 60% LTV, supported by an acceptable repayment strategy. This can include sale of main residence where the equity in the property is suitable to downsize in the local area

Portable:

  • Products are not portable

Offer validity:

  • 90 days

Let to Buy:

  • Accepted

Right to Acquire:

  • Not accepted

Deposit criteria

Evidence of deposit:

  • Required on all purchase applications

Applicants’ savings:

  • Accepted

Capital raising remortgage:

  • Accepted

Inheritance:

  • Accepted

Cash gifted deposit: 

Gifted deposits are acceptable from the following:

  • Parent/Step-Parent/Parent-in-Law
  • Sibling
  • Child/Step-Child/Son-in-Law/Daughter-in-Law
  • Aunt/Uncle
  • Grandparent/Grandchild

Unacceptable sources:

  • Builders deposit
  • Unsecured borrowing
  • Vendor deposit

Property criteria

New build definition:

  • A property is to be considered new if it is a first sale by the builder
  • However, properties which have not sold on physical completion will be considered on an individual basis

Minimum property value:

  • £70,000

Locations considered:

  • England, Wales & Isle of Wight

Retentions:

  • Not offered

Acceptable property:

  • Houses: private and ex local authority or social housing
  • Flats & Maisonettes: Private and ex Local Authority. For Local Authority, restrictions may apply dependent on block size and location.

Timber framed construction:

  • Modern timber framed properties clad with masonry are considered as acceptable
  • Timber framed properties which are not deemed to be of a modern type clad with masonry will be reviewed on an individual basis and will be considered on their merits

Flying freeholds:

  • Flying freeholds will only be considered up to 20% of the total floor area

Coal mining and other forms of extraction:

  • Any properties with a coal mining or metalliferous mining entry/feature within 20m of any building will not be considered

Electromagnetic fields:

  • Any properties within 100m of above ground high voltage electrical supply apparatus will not be considered

Contaminated land:

  • Where there is potential for contaminated land, a pass certificate must be available from an appropriate body

Japanese knotweed:

  • Where a property has Japanese knotweed (or any other invasive weed) located within or immediately adjacent to the site defined as category 4, 3 or 2 in RICS paper IP 27/2012, will not be considered

Solar panels:

  • Properties where solar panels have been installed and are subject to a lease agreement may be considered. An amendment to the lease may be required

Freehold:

  • Houses only. No freehold flats.

Leasehold:

  • The lease must have a minimum unexpired term of 85 years at the time of completion

Commonhold:

  • Not accepted

Structural reports

Reports may be accepted from members of the following bodies:

  •  The Institution of Structural Engineers (www.istructe.org.uk)
  • The Institution of Civil Engineers (www.ice.org.uk)

The report must be referred to the valuer for comment. If the report is not addressed to the applicant, written confirmation must be obtained from the originator that its contents may be relied upon by the applicant(s).

We will not lend on any property with either ongoing movement or where monitoring is required, where this is identified by either the valuer, or where evident in the structural engineer’s report.

The valuer may request additional reports from specific governing bodies.

Specialist reports

We may require specialists’ reports. These most commonly will be:

  • Timber and damp, electrical, trees, cavity wall ties;
  • Mining report (as these are obtained by the solicitors, a special condition is imposed at offer);
  • Any such reports should be prepared by a reputable firm and should be forwarded to us for review and referral to the valuer

The valuer may request additional reports from specific governing bodies

General:

  • New build properties without suitable warranty
  • Properties suffering ongoing structural movement or insurance claims
  • Grade I & Grade II* listed properties
  • Back-to-back/cluster homes
  • Properties located within 20m of a mine entry/feature
  • Properties within 100m of above ground high voltage electrical supply apparatus (excluding small substations)
  • Properties subject to compulsory purchase orders
  • Large flying freeholds (greater than 20% of floor area)
  • Japanese knotweed located within or immediately adjacent to the site, defined as category 4, 3 or 2 in RICS paper IP 27/2012
  • Properties without an internal WC, bathroom or kitchen
  • Properties subject to any onerous occupancy restrictions, including agricultural
  • Shared equity schemes (only acceptable if applicant will own 100% of the interest on completion)
  • Properties subject to enforcement notices
  • Crofting properties/land
  • Self-build properties
  • Properties with a commercial element
  • Non-standard construction

Flats/Maisonettes:

  • New build flats/maisonettes
  • Flats with a gross external floor area less than 35m2
  • Studio flats
  • Freehold flats
  • Balcony access

Non-standard construction:

  • Pre-cast reinforced concrete (PRC)
  • Cast-in-situ concrete
  • Metal framed construction
  • Single skin
  • Large panel systems (LPS)
  • Modern methods of construction (MMC)

Flooding:

  • Properties at significant risk of flooding or that cannot be suitably insured will not be considered

Restrictive covenants:

  • We are unable to consider any property with a restricted occupancy clause within the planning permission. For example, it can only be occupied for a maximum of 11 months in any one year
  • Similarly, property that can only be used for retirement or sheltered accommodation is not accepted. This is the same for any property where a planning restriction (e.g. agricultural restriction) effectively limits a property’s appeal on the open market
  • Please note: for new builds we do consider Section 106 planning obligations
  • We are unable to consider properties within a pre-emption period

Documentation

Full mortgage application:

  • Original fully signed and dated declaration
  • Signed and dated direct debit mandate

Proof of deposit (purchase):

  • Bank statements from applicants(s)
  • Interest waiver letter from donor where gifted deposit

Use of funds (remortgage with a further advance):

  • Breakdown of use of funds, after any debts have been discharged
  • Account details and balance of any debts to be repaid

Proof of address & identification:

  1. Any 2 documents from Table 1 or
  2. 1 document from each table
Table 1Table 2
Valid passportValid (old style) full UK driving license
Valid photo card driving license (full or provisional)Recent evidence of benefit entitlement
National identity cardInstrument of a court appointment
Firearms certificate or shotgun licenseCurrent council tax demand letter or statement
Identity card issued by the Electoral Office for Northern IrelandNon-internet generated bank statements and utility bills

Proof of Visa:

Visa Types Acceptable:

  • EU Settlement Scheme (EUSS) – Pre-Settled Status
  • EU Settlement Scheme (EUSS) – Settled Status
  • Indefinite leave to remain
  • Leave to Remain
  • Family Visa
  • Skilled worker visa
  • UK Ancestry Visa
  • Health and Care Worker visa
  • British National (Overseas) visa
  • Intra company transfer visa

Visa’s must have a minimum 12 months validity

Proof of income – employed:

  • Paid monthly – latest 3 consecutive months and P60 where applicable
  • Paid weekly – latest 6 consecutive weeks and P60 where applicable
  • Bonus/Commission where paid annually or bi-annually or quarterly – latest 2 years payslip evidence

Proof of income – self-employed:

  • Sole trader – minimum 1 year’s SA302s with 3 months’ business bank statements
  • Company director – minimum 1 year’s Limited Company accounts and SA302s with 3 months’ business bank statements

Expenditure:

  • 3 months bank statements required for First Time Buyer, Pepper 12 or Pepper 6 Residential
    applications
  • 2 months bank statements required for all other Residential application types

Other sources of income:

  • Child Benefit – Latest bank statement showing credit of Child Benefit (must be payable for at least next 5 years) 

  • Working or Child Tax Credits – Latest full Working or Child Tax Credit award notice, all pages, with receipt evidenced within bank statement. Must be payable for at least next 5 years 

  • Maintenance – A copy of the maintenance agreement, received under a Court Order, a CSA assessment or a written private agreement drawn up between the separating parties and 6 months’ bank statements as evidence of payment

  • State Pension – Latest annual pension statement or award letter

  • Pension Credits – Latest Pension Credit Award Notice

  • Universal Credit – 3 months’ Universal Credit statements confirming breakdown

  • Disability Living Allowance – Latest Award Notice and must be payable for at least next 5 years

  • Carers Allowance – Latest Award Notice

  • Foster Care Allowance – Remittance Advices from the relevant authority for the previous six months and SA302 for the most recent tax submission
  • Private Pension – Latest annual pension statement or award letter

  • Latest payslip from pension provider or
    Latest letter from pension provider confirming pension due on retirement

Rental/mortgage history:

Where the applicant is currently renting, we will ask to see proof of their last 12 months’ rental payments. This can be through their AST, in addition to bank statements or reference from a letting agent. For current homeowners, where their mortgage is not available on Equifax, we will require the latest 12 months mortgage statement

Right to Buy Criteria

Defaults:

  • None registered in the last 24 months

CCJs:

  • None registered in the last 24 months

Mortgage arrears:

  • No missed payments in 24 months
  • Arrears status of 0 in the last 6 months

Unsecured arrears:

  • Fixed Term – Fixed Term Agreements – No missed payments in the last 6 months
  • Revolving credit – Missed payments considered

IVA/Bankruptcy:

  • Accepted where applicants have been discharged 6 or more years ago

Pay day loans:

  • Accepted where the account closed more than 12 months ago

Repossessions:

  • Accepted where repossession occurred more than 6 years ago

Debt management plans (DMP):

  • Standard range
  • Accepted if satisfied over 12 months ago

Please refer to the Right to Buy product page for further details on each product level.

Maximum LTV:

  • Available to 100% Loan to Purchase Price (including fees) and 75% LTV.

Maximum term:

  • 35 years

Minimum term:

  • 5 years and 1 month

Maximum Loan:

  • Up to £750,000

Remortgage applications:

  • Right to Buy remortgage applications are not acceptable during the pre-emption period

Locations considered:

  • England & Isle of Wight

Acceptable property:

  • Houses only

Section 125 Agreement/Right to Buy
Offer Agreement:

  • For all Right to Buy applications, the customers’ section 125 agreement/Right to Buy offer
    agreement from the council, demonstrating that they have the Right to Buy

Repayment:

  • Interest Only is not available for Right to Buy applications

Shared Ownership Criteria

Defaults:

  • None registered in the last 24 months

CCJs:

  • None registered in the last 24 months

Mortgage arrears:

  • No missed payments in 24 months
  • Arrears status of 0 in the last 6 months

Unsecured arrears:

  • Fixed Term – Fixed Term Agreements – No missed payments in the last 6 months
  • Revolving credit – Missed payments considered

IVA/Bankruptcy:

  • Accepted where applicants have been discharged 6 or more years ago

Pay day loans:

  • Accepted where the account closed more than 12 months ago

Repossessions:

  • Accepted where repossession occurred more than 6 years ago

Debt management plans (DMP):

  • Standard range
  • Accepted if satisfied over 12 months ago

Please refer to the Shared Ownership product page for further details on each product level.

Maximum LTV:

  • Available to 95% Loan to Purchase Price (excluding fees) and 75% LTV

Maximum term:

  • 35 years

Minimum term:

  • 5 years and 1 month

Maximum Loan:

  • Up to £500,000

Acceptable property:

  • Houses: Private and ex Local Authority or social housing
  • Flats & Maisonettes: Private only

Repayment:

  • Interest Only is not available for Shared Ownership applications

Locations considered:

  • England & Isle of Wight

Rent Payable:

  • The rent payable must be no more than 3% of the value of the property in the ownership of the provider

Ownership:

  • The property being purchased must be able to be staircased to 100% private ownership

Leasing:

  • The completing Solicitor must confirm that the lease meets our requirements, including
    that it contains all fundamental clauses, the lease must contain a mortgage protection
    clause in the same form as clause 6 of the Model Lease (Houses)/clause 8 of the Model
    Lease (Flats)

Memorandum of Sale/Offer Letter:

  • A Memorandum of Sale or Offer Letter from the Housing Association will be required for
    Purchase applications.
  • Evidence from the Housing Association of ownership percentage will be required for Remortgage applications. The original Memorandum of Sale is acceptable.

Rent/Service Charge(s):

  • The Rent, maintenance and service charge must be included as a commitment on the
    application.

Vendor:

  • Acceptable subject to the vendor being a registered Housing Association or Registered
    Social Landlord

Help to Buy Criteria

Defaults:

  • None registered in the last 24 months

CCJs:

  • None registered in the last 24 months

Mortgage/Secured loans:

  • Arrears status of 0 in last 6 months
  • No missed payments over the last 24 months

Unsecured commitments:

  • Fixed Term – Fixed Term Agreements – No missed payments in the last 6 months
  • Revolving credit – Missed payments considered

Pay day loans:

  • Accepted where the account closed more than 12 months ago

Repossessions:

  • Accepted where repossession occurred more than 6 years ago

Please refer to the Help to Buy product page for further details on each product level.

Maximum LTV:

  • 75%

Maximum term:

  • 35 years

Minimum term:

  • 5 years and 1 month

Maximum property value:

RegionMaximum Property Price
Wales£300,000

Capital Raising:

  • Pepper Money will only accept capital raising on Help to Buy for the following reasons:
    – Repay Help to Buy equity loan
    – Transfer of Equity
    – Home Improvement
    – For a Help to Buy remortgage; it is the responsibility of the Intermediary to ensure that the application is eligible and compliant with the rules of the Help to Buy scheme administrator; for more information your customer should visit:
    For England – www.myfirsthome.org.uk
    For Wales – www.gov.wales/help-buy-wales/repaying-shared-equity-loan

Purchase locations considered:

  • Wales

Remortgage locations considered:

  • England, Wales & Isle of Wight

Acceptable property:

  • Houses: Private and ex Local Authority or social housing

Evidence of deposit:

  • Required on all purchase applications, the applicants must fund 5% from their own funds

Minimum EPC rating:

  • Help to Buy Wales: From the 1 April all homes sold through the scheme will need to meet
    a minimum EPC of B

Repayment:

  • Interest only is not available for Help to Buy applications

First Homes Criteria

Defaults:

  • None registered in the last 24 months

CCJs:

  • None registered in the last 24 months

Mortgage arrears:

  • No missed payments in 24 months
  • Arrears status of 0 in the last 6 months

Unsecured arrears:

  • Fixed Term – Fixed Term Agreements – No missed payments in the last 6 months
  • Revolving credit – Missed payments considered

IVA/Bankruptcy:

  • Accepted where applicants have been discharged 6 or more years ago

Pay day loans:

  • Accepted where the account closed more than 12 months ago

Repossessions:

  • Accepted where repossession occurred more than 6 years ago

Debt management plans (DMP):

  • Standard range
  • Accepted if satisfied over 12 months ago

Please refer to the First Homes product page for further details on each product level.

Maximum LTV:

  • Available to 95% Loan to Purchase Price for houses and 90% for flats (including fees) and 70% LTV

Maximum term:

  • 35 years

Minimum term:

  • 5 years and 1 month

Maximum Loan:

  • Up to £750,000

Remortgage applications:

  • First Homes remortgage applications are not acceptable 

Locations considered:

  • England only

Authority to Proceed:

  • For all First Homes applications, the customers Authority to Proceed document from the local authority

Repayment:

  • Interest Only is not available for First Homes applications

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