Special lending situations
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Buy-to-Let policy | Income | Property |
Special lending situations
This section gives an overview of the C&G mortgage lending
policy for the most common special lending situations. For any
others, please contact your C&G Business
Development Manager.
Index
Auction and sealed bid
properties
- The application will be referred to mortgage underwriters for
consideration.
- The property must be of good quality and in good
condition.
For further information please contact your Business Development Manager.
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Builders’ incentives
Deposit paid by the
builder:
- Can be accepted only from well-known reputable builders and on
new-build properties only.
- A maximum 5% deposit may be accepted as long as the builder is
GIVING and not LENDING the deposit to the purchasers. A deposit,
which is repayable and/or protected by way of a second charge, is
unacceptable.
- If the builder is giving more than 5% deposit – the application
will be referred to mortgage underwriters.
- If the purchase price is not affected, confirm purchase price
with solicitors and proceed as normal.
- Appropriate product criteria for loan to valuation (LTV) limits
apply.
Cash back payments:
- Where building developers offer a cash-back incentive on a
new-build property.
- The valuation figure provided by a valuer for a property where
a builder’s incentive is applicable will have the 'incentive'
amount already deducted, effectively producing a 'net' figure.
- If you are made aware by a customer that there is a builder’s
incentive to the purchase, you must advise the customer that the
valuation will be carried out on an 'open market' basis, which may
not reflect the purchase price.
Appeals against valuation figures on
properties purchased with incentives will not be considered.
Low-start schemes:
Customer funds a
percentage of the purchase price (for example as little as 70%) by
taking out a mortgage. The remaining percentage is financed
by a loan from the builder and is secured by a second charge on the
property.
- Customers must provide 5% of the purchase price as a
personal deposit in addition to the percentage provided by the
builder.
- All applications will be referred to
mortgage underwriters.
- A copy of the scheme details will be required by the mortgage
underwriters.
- Vendor deposits are NOT acceptable.
If the deposit is from an unusual source, not
stated above, contact your Business Development Manager for further
details.
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Index
Business use of property
Office/Study
Applications where one room is being used on
an informal basis as an office/study are acceptable.
Any other situations will need to be referred to mortgage
underwriters.
Child minding
Acceptable on a small scale, caring for up to 6 children in
addition to any children in the family.
- The customer can be treated as self employed.
- If more than 6 children, the application will be referred to
mortgage underwriters.
Foster children
Refer to your Business Development
Manager for further guidance.
Annexe
Applications will be considered in the following situations:
- Where the annexe is used by a dependent relative or au
pair.
- Where the annexe is vacant.
- If the annexe is let commercially, letting must be on an
assured shorthold tenancy.
- If the annexe is larger than the owner-occupied part of the
building, the application will be referred to mortgage
underwriters.
Supported lodgings and small
residential care homes
- Local authority supported lodgings are used for adults with
learning difficulties whose placement is supported by the local
authority social services department (rather like fostering).
- Small residential care homes are where elderly medically infirm
people reside in the customer’s home and are again funded by social
services.
These are acceptable subject to a maximum of
two residents under the scheme. If there are three or more,
the application will be referred to mortgage underwriters.
Lodgers
- Up to two lodgers are acceptable providing that they are
treated as a family member, ie sharing living accommodation.
- For main advances, the solicitor wil ensure that the Occupiers
Waiver and Postponement form is signed. For Homeowner Loans, the
lodger(s) must sign the 'Other occupiers' section of the
application form.
- Married to the customer
- The customer's partner
- A member of the customer's family
- The rent from the lodger(s) can be used
- Lodger income can be verified from three months’ bank
statements if amounts provided are regular.
- Take care if lodger(s) hold any legal rights in a property.
The application will be referred to mortgage
underwriters.
- If there are more than two lodgers, the application will be
referred to underwriters.
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Customers not resident in property
This procedure does NOT relate to
buy-to-let or second properties
It is acceptable for a borrower not to reside
at the mortgaged property and be on the mortgage, eg when parents
buy for a child or one spouse is living abroad for their
employment. Customers who do not reside at the mortgaged
property on right-to-buy applications and applications involving an
ex-spouse or ex-partner will be referred to mortgage
underwriters.
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Index
Discounted purchases
Sitting tenants (other than local
authority 'right to buy') and family arrangements
Applications from sitting tenants who are able to purchase their
home at a concessionary price from a private landlord, and family
arrangements where a discount is being offered, are acceptable.
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Expatriates
The definition of an expatriate is 'a person
who lives outside their native country'. Lending to British
expatriates will only be agreed if:
- The customer is outside the UK.
- The customer has a clear intention to return to the UK within
10 years and has the right to reside.
- The customer can apply for one future main
residential property which will not be immediately owner occupied,
but there must be a clear intention to return to the property
within 10 years.
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Flying freeholds
- This is where a property is built (or has been converted) in
such a way as to have the 'vertical' dividing line between it and
its attached immediate neighbour in one position at first floor
level and in a completely different position at ground floor
level. An example of this is a first floor bathroom in one
property being over the kitchen of the adjoining property.
- The valuer's comments are particularly important.
- Acceptability is determined by the solicitor acting for the
lender.
- If the solicitor, after investigating the title, advises not to
proceed, the application will be declined.
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Foreign nationals
Applications from foreign nationals are considered
provided:
- They are resident in the UK at the time of their
application.
- They will occupy the property immediately the mortgage
begins.
Non EU States
In order to continue with the application, the
customer's permanent right to reside in the UK must be confirmed,
using specific documentation.
The following documents can be accepted:
- A letter from the Home Office confirming the customer's
'indefinite' right to remain in the UK.
- Indefinite/Right of Abode UK Residency stamp in the
passport.
- A Residence Permit showing 'indefinite' rights to remain.
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Foreign nationals and buy-to-let/second
properties
Applications received from foreign nationals
resident in the UK are acceptable for buy-to-let/second properties
provided they meet requirements in terms of residency and
buy-to-let criteria. UK Nationals/expatriates can apply for one
future main residential property that will not be immediately owner
occupied, but there must be a clear intention to return to the
property within 10 years.
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Index
Freehold flats
A flat or a maisonette with a freehold title
is unacceptable.
Other freehold arrangements
If the customer owns one flat/maisonette in
the block and owns the freehold of all flats subject to the other
flats being leasehold, this is acceptable if the following
conditions apply:
- Customer must occupy one flat/maisonette.
- No more than four flats/maisonettes in block (ie the
applicant’s flat plus up to three others).
- The valuation must include the freehold of the whole block and
is subject to the leases of the other flats/maisonettes.
- Insurance must be arranged for the reinstatement cost of the
whole property (ie including the units not occupied by the
customer).
- The flats should be converted and not purpose-built.
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Guarantors
- Guarantor(s) must reside in the UK.
- Maximum of two guarantors is acceptable.
- On a Homeowner Loan, the guarantor must be party to the main
account.
- Foreign nationals can act as guarantors providing they have
permanent rights to reside in the UK (see Foreign Nationals section in this
chapter).
- If the loan exceeds 75% LTV, the guarantor must be under 65 at
the time of application.
- Ensure that the guarantor will not be 75 or over before the end
of the term. If they will be, the term must be reduced.
Who can act as a
guarantor?
The guarantor must be a close relation of one of the customers. The
following are acceptable:
- Spouse/Long-term partner
- Parent
- Sibling
- Son/Daughter
*A long-term partner is classed as couples who
have lived together for two years or more. This can be confirmed by
a Voters’ Roll check.
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Second properties
While most C&G mortgages are for normal
owner–occupation, lending will be considered for other
residential purposes, as follows:
- Buy to let.
- Holiday homes/second homes.
- Pied a Terre.
- Occupation by a relative
Lending will not be considered on a property
which is being purchased for the sole purpose of restoration and
sale.
Applications will be governed by mortgage
regulation provided any of the following occupy at least 40% of the
property/land:
- The individual
- An immediate relative, (their spouse, parent, brother, sister,
child, grandchild or grandparent)
- The person with whom the individual has a relationship which
has the characteristics of the relationship between a husband and
wife.
Provided the property is occupied as described
above the full product range is available. This is acceptable
even where there is occasional informal/holiday letting, where the
applicant will only occupy the property occasionally or where
the customer will not occupy the property at all, provided it
will not be let out.
Customers in tied accommodation or living
abroad as a result of their employment, who wish to mortgage their
main residence only, but will let it whilst they are abroad or in
tied accommodation are eligible for the full C&G mortgage
product range (any individual product maximum LTVs still
apply). There must be a clear intention by the customer to
occupy the property in the future. These customers do not have to
fit within any current Buy to Let product restrictions, however, if
there is a formal/standard tenancy agreement in place, the Buy to
Let property criteria (e.g. professionally managed etc) must be
met.
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Holiday homes/Second
homes
- A holiday/second home is a property to be used primarily as a
holiday/second home which can also have occasional holiday letting
(defined as less than four months).
- If let for more than four months of the year, treat as a
buy-to-let.
- The full C&G mortgage product range is available (any
individual product maximum LTVs still apply).
- Standard product and valuation fees apply.
- Not acceptable for Right to Buy, guarantor applications or
builders’ incentive schemes.
- Property must be of good quality, in sound structural condition
and in a reasonable state of repair.
- Standard construction policy applies.
- Only one property is to be considered. If more than one
property is required, buy–to-let criteria will always apply.
- Timeshare properties are excluded, with no exceptions.
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Lettings and release of
land
Lettings
Where the property was originally the owner’s
main residence and they now wish to rent the whole property to
someone else.
- The letting application fee is £225.
Release of Land
Release of land is where the property owner
sells or donates part of the land to someone else.
- Maximum LTV is 90% for a main residence.
- Maximum LTV is 75% for a buy to let.
- A revaluation may be required.
- Application fee is £225.
For more information on how to proceed with
the above, refer to your Business Development
Manager.
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Local authority or housing association - incentive
schemes
Applications will be considered where the
local authority/housing association has given a cash lump sum to
vacate the council house to assist a purchase in the private sector
- cash is given to solicitors at completion.
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Local authority or housing association - purchase of
remaining share
Applications will be considered
where customers already own a share in their current property
and wish to purchase the remaining share from the local
authority/housing association. Lending will only be agreed
where the customer is purchasing 100% of the property.
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Index
Multiple
applicants
There can be up to four applicants (including
up to two guarantors).
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Occupation by a relative
Customers may wish to purchase a property
to be occupied by a relative (typically an elderly dependant or
student offspring) who will not be named as a
customer.
If the tenancy is informal and involves no
legal agreement, process as 'Holiday homes/second homes' and also
note the following:
Qualifying individuals
- Spouse
- Long-term partner
- Parent
- Sibling
- Son/Daughter
- Grandparent
- Grandson/Granddaughter
If there is a formal tenancy, the application
must meet buy-to-let criteria.
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Pied a Terre
Pied a Terre is a property that has been bought close to the
customer’s place of work. There should be no letting.
- The full C&G mortgage product range is available (any
individual product maximum LTV’s still apply).
- Income must comfortably cover all mortgage commitments and the
additional expense of running two households.
- One such property per customer only or the application will
have to fit the buy-to-let criteria.
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Index
Power of Attorney
A Power of Attorney is a document by which an
individual grants authority to another to act on their
behalf. The Power can be general or can be limited to
specific acts.
A mortgage application form is acceptable if
signed by an Attorney subject to the following:
- The Power of Attorney must be a General Power, no more than 12
months old, an Enduring Power of Attorney signed before 1
October 2007, or a Lasting Power of Attorney.
- Co-customers cannot act as Attorneys for each other.
- In England and Wales, an Attorney cannot act on behalf of more
than one customer. If both customers wish to appoint an
Attorney, each must appoint a different person to act on their
behalf.
- In Scotland, an Attorney can act for more than one
customer.
- The Attorney must be identified in accordance with Money
Laundering guidelines in the same way as the customer.
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Right to buy and other schemes
Applications are considered where the property is being
purchased:
- Under a 'Right-to-Buy' scheme (provided the customer(s) will
own 100% of the property).
- From a local authority/housing association under a discount or
incentive scheme.
- Under a Ministry of Defence or Police House discount
scheme.
- Under a builder's scheme, such as a property 'exchange' or
where the builder is paying a deposit.
- Under the Key Workers Initiative.
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Starter homes initiative for key workers
This scheme is aimed specifically at nurses,
teachers and the police, although other key workers may be
eligible.
The scheme provides assistance for house
purchase in areas where high property prices prevent 'key workers'
from living in or near the communities they serve. The types of
assistance fall into two categories:
- Interest free loans, including equity
loans
Or
- A new build property being provided by the
Scheme
These loans are repayable only on sale of the property at the
percentage value borrowed, eg if an equity loan was 25% at
purchase, then 25% of the sale price would be repayable. The loans
are secured against the property by way of a second charge.
Schemes that provide this type of assistance
are acceptable.
Share ownership on a property
purchased on the open market or newly built by the
scheme
This is on an ownership/rent
basis. Further shares may be purchased at current market
value.
Schemes that provide this type of assistance
are unacceptable.
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Tied accommodation
Where the customer is living in accommodation provided by their
employer (in the UK or abroad) due to their employment. The
property to be mortgaged is let upon completion but will become
their main residence in the future, when they leave the tied
accommodation.
- Not restricted to Buy to Let products.
- Not restricted to maximum 75% LTV.
- Ensure there is an intention to occupy the property in the
future.
- All other buy-to-let criteria, eg professionally managed
letting, must be satisfied.
- If a customer does not intend to use the property as their main
residence in the future it must be treated as buy to let in terms
of both product and policy.
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