Mortgage Criteria

Residential Mortgage Criteria

Our Residential mortgage criteria is 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 experienced previous financial blips.

Table of Contents

Applicant criteria

Minimum age:

  • 21

Maximum age:

  • 75 at end of term
  • For joint applications the age of the oldest application 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

CCJs:

  • None in the last 6 months

Defaults:

  • None in the last 6 months

Mortgage arrears:

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

Unsecured commitments:

  • Fixed term: None in the last 6 months
  • Revolving credit: Missed payments considered on Pepper 24, 18, 12 and 6 products we will ignore 2 individual defaults (per application), up to and including £150.00 each, where these defaults relate to utilities, communications or mail order providers.

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 range: For active DMPs or those satisfied in the last 12 months, a separate product range is available. 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 range: Accepted if satisfied over 12 months ago

Residential status:

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

EU Nationals accepted subject to:

  • 3 years’ UK residency
  • 3 years’ continuous UK employment history

Non EU Nationals accepted subject to:

  • 3 years’ UK residency
  • 3 years’ continuous UK employment history
  • Indefinite leave to remain

Diplomatic immunity:

  • Not accepted
Income criteria

Minimum earned income:

  • £18,000 per application

Foreign currency:

  • Not accepted

Employed:

  • Minimum of 6 months in current job with 12 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 months’ 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 with 3 months’ bank statements and last P60
  • 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 25% or more will be underwritten as self-employed
Income typeProportion considered
Basic salary100%
Car allowance100%
Bonus50%
Overtime50%
Commission50%

Self-employed: Sole Trader/Partnership:

  • 2 years’ accounts required, 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 accepted in addition to the full business accounts. SA302s 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: company director:

  • 2 years’ accounts required, 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 accepted

Pension income:

  • State retirement pension (SRP) – latest annual statement of pension
  • Private pension – latest payslip from pension provider or letter from pension provider, with 3 months’ bank account statements showing credits

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”

Unacceptable Income:

  • We cannot currently accept Universal Credit, Disability Living Allowance, Carer’s Allowance, or income that is solely from UK land & property, or investment income. For other unacceptable income types, please speak to us.
Loan criteria

Maximum LTV:

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

Maximum term:

  • 35 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

Number of mortgages with Pepper:

  • Maximum of 3 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 Buy:

  • 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 ownership/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 income – employed:

  • Paid monthly – latest 3 consecutive months with P60 and bank statements
  • Paid weekly – latest 6 consecutive weeks with P60 and bank statements

Proof of income – self-employed:

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

Other sources of income:

  • Child Benefit – latest notice with bank statements (must be payable for at least the next 5 years)
  • Working or Child Tax Credits – full award notice with bank statements
  • 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 statement of pension/due on retirement
  • Pension Credits – latest Pension Credit Award Notice
  • Private pension – latest annual statement of pension/due on retirement or 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

Confirmation of mortgage payments:

  • To support the re-mortgage and to verify that the applicant is not experiencing financial difficulty and able to meet their mortgage repayment a copy of the latest bank statement evidencing payment of the last months mortgage payment should be provided.

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