Please note:
Leeds Building Society only accepts mortgage applications from intermediaries where they are providing an advised sales service, with the exception of Buy to Let & Holiday Let applications. It is the responsibility of the intermediary to ensure that all applicable law including, without limitation, the Financial Conduct Authority rules on advised mortgage sales are complied with including, without limitation, the provision of adequate explanations.
If you’re unsure about anything or think there’s something missing, talk to our Head Office BDMs on 0345 045 4050. You can also reach our experts on our Broker Chat, or find your regional BDM here on our Contact Us page.
Alternatively you can download a copy of the Criteria Guide (PDF).
All our other forms and documents can be found on the forms page.
The Society welcomes applications from mortgage intermediaries where they are providing an advised sale process to customers. Buy to Let applications are also acceptable on an execution only basis. It is the responsibility of the mortgage intermediary to ensure that all Financial Conduct Authority rules (including MCOB) on advised mortgage sales are complied with in full. This document summarises our lending criteria.
Mortgage applications should meet the following high level criteria as a minimum. However Intermediaries should be aware of the additional criteria / guidance in this guide.
| High Level Criteria | Minimum | Maximum |
|---|---|---|
| Residential mortgage loan amount | — | £2,000,000 |
| Buy to Let mortgage loan amount | — | £1,000,000 |
| Limited Company Buy to Let loan amount | — | £500,000 |
| HMO mortgage loan amount | — | £1,000,000 |
| Minimum HMO property valuation | £100,000 £250,000 London |
— |
| Holiday Let mortgage loan amount | — | £1,000,000 |
| Minimum Property valuation | £50,000 | — |
| Mortgage term (not product) | 5 years | 40 years RIO - No max |
| Age at time of application | 18 years RIO - 55 years |
RIO - 80 years |
| Age at end of mortgage term | — | Residential - 85 years Buy to Let, Limited Company Buy to Let, HMO or Holiday Let - No max age RIO - No max age |
| Distressed sale & lease back | Not accepted | |
| Type of Lending | Maximum LTV | |
|---|---|---|
| Residential lending up to £500,000 | 95% | |
| Residential lending £500,001 to £600,000 | 90% | |
| Residential lending £600,001 to £1,000,000 (Contractors: max 85%) | 85% | |
| Residential lending £1,000,001 to £2,000,000 | 75% | |
| Buy to Let lending up to £500,000 | 80% | |
| Buy to Let lending £500,001 to £750,000 | 75% | |
| Buy to Let lending £750,001 to £1,000,000 | 70% | |
| Right to Buy. Right to Buy documentation will need submitting and should confirm both eligibility & the discounted price. A landlord's reference or evidence of rent payments will also be required. Any request for a loan in excess of the discounted purchase price amount in subject to a ranking agreement/deed/letter of postponment being obtained from the landlord. |
75% (LTV expressed as % of property value) | |
| New Build (valuation using RICS new build guidance) – Houses (Residential / BTL & Limited Company Buy to Let / Holiday Let) | 90% / 75% / 70% | |
| Flats (New Build) (Residential / BTL / Holiday Let) | 80% / 70% / 65% | |
| Flats (Non-New Build)(Residential / BTL & Limited Company Buy to Let / Holiday Let) | 80% / 75% / 75% | |
| Buy To Let - maximum portfolio size 10 mortgaged rental properties (all lenders) , up to 4 of which can be mortgaged with the Society | 75% | |
| Limited Company Buy to Let - Maximum 10 mortgaged rental properties (all lenders), up to 4 of which can be mortgaged with the Society. This includes mortgages, either separately or in aggregate, in the applicant’s names, the borrowing limited company or any other limited company where an applicant owns more than 20% of the shares. The applicants can only have one company financed to the Society. | 75% | |
| HMO - maximum portfolio size 10 mortgaged rental properties (all lenders) , up to 4 of which can be mortgaged with the Society | 75% | |
| Holiday Let - maximum portfolio size 10 mortgaged rental properties (all lenders), up to 4 of which can be mortgaged with the Society | 75% | |
| Capital raising for purposes other than improving mortgaged property (excluding Retirement Interest only). | 75% | |
| Capital raising for improvement of the mortgaged property, purchase of equity or purchase of additional land (excluding Retirement Interest only). | 90% | |
| Capital raising for business purposes | — | |
| Interest Only (excluding Retirement Interest Only) | 60% | |
| Interest Only Part & Part (Max Interest Only element 60%) Sale of mortgaged property is an acceptable repayment strategy but equity must make downsizing plausible at the end of the mortgage term. Buy to Let & Holiday Let lending are subject to different lending criteria. Not available for shared equity/ownership or lending into retirement. |
75% | |
| Retirement Interest Only Sale of mortgaged property is the only acceptable repayment strategy. Capital raising for property and non-property purposes is allowed, subject to maximum 55% LTV. |
55% | |
Maximum Loan to Value is subject to available products.
Product fees can be added to the loan, up to the maximum LTV/loan size allowed by policy.
Property must be situated in England, Wales, Northern Ireland or mainland Scotland.
Where Shared Ownership is a subset of a larger development, we will lend on the greater of 25% or up to 10 of the Shared Ownership properties. Otherwise, the Society operates a maximum 25% exposure to any one development. If you are unsure as to whether this may impact your client’s application, we suggest contacting your Business Development Manager before proceeding.
Minimum property valuation: £50,000 irrespective of location on Residential, Buy to Let and Holiday Let.
Minimum property valuation: £100,000, £250,000 London on HMO.
Property must be of good quality and readily saleable with a life expectancy well beyond the term of the mortgage.
Older properties must be modernised to provide basic standards, including provision of an internal kitchen, shower / bath and W/C.
Property will be the primary residence (domestic, residential owner occupation) or be used for Buy to Let / Holiday Let.
Whilst all parties to a mortgage will be considered, it is highly advisable to ensure the primary income generator is the first applicant.
The Society uses affordability as a way of assessing how much we will lend. The decision to lend will be based on the borrower's ability to repay. The interest rates used for the assessment will be at a level above the proposed mortgage pay rate to reflect the impact of a rise in interest rates.
We will lend up to 4.75 times gross income for home-movers and re-mortgages up to 85% LTV, or 4.5 times gross income for first time buyers or LTVs over 85%.
All income for affordability must be evidenced and be in Pounds sterling.
If you use our Affordability Calculator, you must include all applicants and individuals (except those able to be excluded, see section ‘Who can be excluded’) residing in the property.
The Society will make every effort to speed mortgage applications through to offer and subsequently completion, but intermediaries can help expedite the process by providing all necessary documentation with the application. The relevant check lists can be accessed on our Forms page.
Please note; In some instances we may proceed with reduced documentation. You will receive a bespoke requirements list within 24 hours of submitting the full application.
Buy-to-Let (including Let to Buy)
The Society uses an Interest Coverage Ratio (ICR) and a stressed interest rate to calculate affordability.
Background rental property portfolio must generate a 145% ICR at a stressed interest rate of 6.50% regardless of tax band status. This can be evidenced through the completion of the Existing Property Declaration Form.
Rental income will be independently verified by the Society’s valuers. Additional/surplus sources of income will not be considered as part of the affordability assessment on BTL applications, however will be considered as contingency in the event of void periods.
Holiday Let
We assess holiday let affordability using an average of the high, mid and low expected seasonal rental income.
The letting agent should confirm in writing a high, mid and low expected seasonal rate. We’ll then take an average of these seasons over a 30-week period to calculate the annual rental income.
As an example, if high season is £900, mid-season is £620 and low season is £400, we’d use the average of £640 over 30 weeks to give an annual rental figure of £19,200 and apply this to the relevant rental coverage calculation.
The calculation is £19,200 / 12 months = £1,600 monthly rental.
£1,600 / 1.50 (ICR) = £1,066.67 / (Applicable Stress Rate from the Stress Rate Table) 5.50% used for illustrative purposes = £19,394
£19,394 x 12 therefore gives a maximum lend of £232,727
HMO
The rental value will be based on 100% occupancy of the lettable rooms.
Background rental property portfolio must generate a 145% ICR at a stressed interest rate of 6.50% regardless of tax band status. This can be evidenced through the completion of the Existing Property Declaration Form.
Limited Company Buy to Let
The Society uses an Interest Coverage Ratio (ICR) and a stressed interest rate to calculate affordability (please see Stress rate & Interest Coverage Ratio Table).
The monthly rental income of background portfolio under Limited Company ownership must cover the cost of any associated mortgage payments (interest only) using an ICR of 125% at 6.50%.
The monthly rental income of background portfolio under the ownership of the applicants must cover the cost of any associated mortgage payments (interest only) using an ICR of 145% at 6.50%.
Stress rate & Interest Coverage Ratio Table
| Standard BTL, HMO & Holiday Let | ||||||||
|---|---|---|---|---|---|---|---|---|
| Segment | Tax Code / Minimum ICR | Stress Rates | ||||||
| <5 Year Purchase, Capital Raising Remortgage & All Let to Buy | Like for Like Remortgage | >5 Year Term | ||||||
| Standard Buy to Let | Basic Rate - 125% | Product Rate + 2% (Min. 5.50%) | Product Rate (Min. 5.00%) | Product Rate + 1% (Min. 5.50%) | ||||
| Higher Rate - 145% | ||||||||
| Additional Rate - 150% | ||||||||
| Small & Large HMO | 170% | |||||||
| Holiday Let | 150% | |||||||
| Background Buy to Let | 145% | 6.50% | ||||||
| Limited Company BTL | |||
|---|---|---|---|
| Minimum ICR | Stress Rate | ||
| <5 Year Purchase & Capital Raising Remortgage | Like for Like Remortgage | >5 Year Term | |
| 125% | Product Rate + 2% (Min. 5.50%) | Product Rate (Min. 5.00%) | Product Rate + 1% |
The monthly rental income of background portfolio BTL properties held by the applicant(s) must cover the cost of any associated mortgage payments (interest only) using an ICR of 145% at 6.50%. This can be evidence through the completion of the Existing Property Declaration Form.
The monthly rental income of background portfolio under Limited Company ownership must cover the cost of any associated mortgage payments (interest only) using an ICR of 125% at 6.50%.
The monthly rental income of background portfolio under the ownership of the applicants must cover the cost of any associated mortgage payments (interest only) using an ICR of 145% at 6.50%.
The Society does not accept applications for individuals who are subject to:
Broker fees should be no more than 2% of the loan amount. If the broker fee is more than 2% on a loan amount below £100,000, we will accept a broker fee of up to £1,000.
All incentives should be disclosed to the valuer as part of the application. The valuer will consider the total property valuation recognising incentives; standard RICS process.
It is acceptable for a builder/vendor to provide cashback or contribution towards the deposit, provided that (i) the incentive is disclosed appropriately and (ii) the value does not exceed 5% of the purchase price or valuation, whichever is the lower. If the cashback/deposit is greater than 5%, the excess will be deducted from the price and our lending will be based on the reduced value.
Irrespective of builder/vendor cashback/gifted deposit, the Society expects a personal contribution from the buyer of at least 5% of the gross purchase price or valuation, whichever is the lower.
HTB ONLY
All incentives should be disclosed to the valuer as part of the application UK Finance Disclosure Form. Financial incentives up to 5% of the full purchase price are acceptable in principle. Please see below the types of financial incentives that would/ would not be acceptable:
Non-financial incentives such as property upgrades i.e. carpets, kitchen appliances, white goods, fitted furniture, landscaping and Builders Options vouchers (that are to be used on property upgrades) are acceptable in principle and will be considered on a case by case basis.
Summary of Buy to Let Lending Criteria
*At least one applicant must be able to demonstrate a primary income (Employed, Self Employed or Retirement Income). Evidenced through latest monthly bank statement and latest monthly proof of income (latest year self-employed).
Income must be in Pounds sterling. Whilst the properties are expected to be self-financing, the presence of an additional income provides contingency in the event of ‘void’ periods.
All criteria, including: Buy-to-Let, Limited Company Buy-to-Let, Portfolio Buy-to-Let, Holiday Let and HMO, is subject to product availability.
The Environment Act 1990 was intended to identify contaminated land, bring it back in to beneficial use and ensure the cost of remediation is met by an appropriate party, ideally the original polluter. If requested by the Society or its valuer, an environmental search may need to be obtained. The Society will review the recommendations made by the environmental specialist, alongside relevant legal & insurance advice.
The Society will not lend where Japanese Knotweed is present and the valuer considers it to present a significant risk to the property &/or future saleability.
The Society will not consider applications where a conviction exists, unless it has been spent under the Rehabilitation of Offenders Act 1974.
Similarly, the Society will not consider applicants with pending prosecutions which:
Maximum of one County Court Judgement (CCJ) or default in the last 3 years which must have been satisfied and be no greater than £500 in value will be considered.
Unsatisfied CCJs and defaults are not acceptable.
A minimum monthly payment of 3% of the full balance of the aggregate credit card and any revolving credit agreements is applied as an outgoing within the affordability assessment.
A credit search will be carried out by the Society, using an approved Credit Reference Agency. Underwriters have the discretion to request additional information in order to support the application.
In assessing the application, the Society uses credit scoring, refer to your Business Development Manager for further information. We would expect:
Where a Director owns less than 25% of the shares in a limited company; the individual will be assessed as employed with affordability based on payslips (salary), dividends, etc.
Where the shareholding is 25% or more, the individual will be assessed as Self Employed with affordability based on the Director’s salary and dividends received albeit net profit information will be required at DIP stage. See Self Employed section for acceptable evidence.
Fees: The Society offers a variety of mortgage products, some of which charge fees. The Product Fee and Funds Transfer Fee can be paid up front or added to the mortgage advance, up to the maximum LTV/loan size allowed by policy, thereby increasing the total amount borrowed. Interest will accrue on the fee and the mortgage at the product rate. Any fees the customer chooses to add to the advance will be considered in the Society's affordability assessment.
Mortgage Exit Fee: A standard fee levied where an advance is redeemed before it reaches maturity.
Early Repayment Charge: This charge is a genuine pre-estimate of the loss to the Society if a customer redeems early. The level of charge may vary by product, but is clearly illustrated in the relevant product documentation.
Applicants must be in permanent full or part-time employment and continuously employed for the last 6 months, including probationary period if appropriate.
Our guide shows when an EWS1 form is required in the assessment of cladding on a block of flats. You can see the guide here.
The Society will consider ex-local authority property, which is readily saleable (eg Property is not a lone owner occupied house in a large local authority tenanted development).
Ex-local authority flats will only be considered in England, Wales & Scotland, subject to:
Where the property is being purchased from a close family relative and therefore sold at a discount to the market value, the Society will consider lending up to 100% of the purchase price. The LTV for product selection will be calculated using loan amount as a percentage of open market value.
The Society will not consider applications for simultaneous capital raising / home improvements.
The Society offers a variety of mortgage products, some of which charge fees. The product fee and funds transfer fee can be paid up front or added to the mortgage advance, up to the maximum LTV/loan size allowed by policy, thereby increasing the total amount borrowed. Interest will accrue on the fee and the mortgage at the product rate. Any fees the customer chooses to add to the advance will be considered in the Society's affordability assessment.
Feudal tenure is normally acceptable; this type of tenure is common to Scotland.
It is important that an applicant disclose all existing financial commitments, including but not restricted to loans, hire purchase agreements, student loans, maintenance payments, leasehold payments, maintenance lease, ground rent, service charges, mortgages, school fees, child care / nursery fees, the cost of any interest only repayment strategy and other significant out goings. The monthly payment on these commitments will be deducted in assessing affordability.
The applicant will also be required to give details of anything that they are aware of that will, or is likely to, change their income or expenditure during the term of the mortgage.
Applications under the Government’s First Homes scheme are acceptable. Please contact your BDM for more information on how to submit these cases.
Gifted deposits from family members as defined by the regulator (spouse, parent, grandparent, sibling, child or grandchild) will be considered for mainstream residential lending. The individual gifting the deposit must be resident in the UK and will be subject to routine bankruptcy searches. The Society requires completion of the 'Gifted Deposit Form' which can be obtained from our web site and should be submitted with the application.
Green mortgages are available to all intermediaries for residential and Buy to Let property purchases only with an energy performance rating of A, B or C. Please note following information:
EPC requirements
Lending supported by a guarantor is not acceptable.
Where the property is purchased under the English or Welsh scheme, expenditure should include an estimation of future payments on the equity loan. This should be calculated as 3% of the equity loan per annum. This does not apply in Scotland.
HTB ONLY
All incentives should be disclosed to the valuer as part of the application UK Finance Disclosure Form. Financial incentives up to 5% of the full purchase price are acceptable in principle. Please see below the types of financial incentives that would/ would not be acceptable:
Non-financial incentives such as property upgrades i.e. carpets, kitchen appliances, white goods, fitted furniture, landscaping and Builders Options vouchers (that are to be used on property upgrades) are acceptable in principle and will be considered on a case by case basis.
The Society will consider ‘holiday let’ lending requests.
We assess holiday let affordability using an average of the high, mid and low expected seasonal rental income.
The letting agent should confirm in writing a high, mid and low expected seasonal rate. We’ll then take an average of these seasons over a 30-week period to calculate the annual rental income.
As an example, if high season is £900, mid-season is £620 and low season is £400, we’d use the average of £640 over 30 weeks to give an annual rental figure of £19,200 and apply this to the relevant rental coverage calculation.
The calculation is £19,200 / 12 months = £1,600 monthly rental.
£1,600 / 1.50 (ICR) = £1,066.67 / (Applicable Stress Rate from the Stress Rate Table) 5.50% used for illustrative purposes = £19,394
£19,394 x 12 therefore gives a maximum lend of £232,727
We use an Interest Coverage Ratio (ICR) and a stressed interest rate to calculate affordability.
Summary of Holiday Let lending Criteria
However, additional information may be required to support the application. This recognises the greater risk of void periods associated with holiday letting and may include:
*The primary applicant must be able to demonstrate a primary income (earned or savings generated). Evidenced through latest monthly bank statement and latest monthly proof of income (latest self-employed ). Income must be in Pounds sterling.
We’re now specialising in both Small HMOs (housing up to and including 6 occupants) and Large HMOs (Housing more than 6 occupants), subject to product availability.
The Society defines an HMO as an entire property, house or flat which is let to 3 or more tenants who form 2 or more households and who share a kitchen, bathroom or toilet.
Summary of HMO lending criteria
The Society’s specialist valuers will assess an HMO property’s market and rental value based on 100% occupancy of all of the lettable rooms.
Confirmation must be obtained as to whether there is a need for a Mandatory HMO licence, or if the Local Authority where the property is situated has additional Licensing or planning requirements. The Conveyancer must ensure these are in place by completion.
*The primary applicant must be able to demonstrate a primary income (earned or savings generated). Evidenced through latest monthly bank statement and latest monthly proof of income (latest self-employed ). Income must be in Pounds sterling.
As a minimum, the Society requires that the property be covered by appropriate buildings insurance at all times. The amount of cover should be sufficient to demolish & rebuild.
The Society recommends that appropriate life insurance is in place for all borrowers.
The Society encourages mortgage applicants to protect their mortgage payments against the risks of unemployment, accident or sickness resulting in an inability to work.
Leasehold properties with an unexpired lease of at least 85 years at the start of the mortgage are acceptable, subject to:
Properties subject to an onerous lease clause regarding any excessive or unreasonably escalating ground rent are not acceptable.
The Society will consider lending where the renegotiation of the lease is central to the underlying purchase. The new lease must meet the minimum term at completion.
Virtual freehold (where the unexpired lease is in excess of 500 years) is acceptable.
Flying freehold and freehold flats may be considered where a relatively small proportion of the property extends over another and the valuer states that re-saleability is unaffected.
There are a small number of property types where the Society would not look to lend and these include:
Affordability for flats built before 1 January 2020
We will now automatically apply an additional outgoing of £100 per month when assessing affordability for all flats that were built before 1 January 2020. We do so to protect customer interests and to cover any increased leaseholder costs for fire safety remedial works which fall outside the funding programme. This applies to residential mortgages and holiday lets where personal affordability is used.
Please note:
For any further queries please speak to your Business Development Manager.
This section does not apply to Retirement Interest Only mortgages.
When the term of the mortgage extends beyond the borrower's retirement age it is known as ‘lending into retirement’. Lending into retirement is currently available across our standard Residential mortgage ranges.
Our income assessment is based on the following criteria:
A. Retirement is 10 years or more away AND the term of the mortgage is up to 5 years after retirement
B. Retirement is less than 10 years away, OR
C. The term of the mortgage is more than 5 years after retirement
D. Already retired
If you have your client's details handy use our quick income assessment tool to get an idea of what income will be used to assess their affordability.
Please note:
Summary of Limited Company Buy to Let Lending Criteria:
• We accept applications from Special Purpose Vehicles (SPVs) which have been set up for the purpose of BTL / residential property investment only. Other services or manufacturing are not acceptable. SPVs with commercial property/assets/loans are not acceptable.
• A company can be registered with one or more of the following SIC codes only
o 68100 - Buying and selling of own real estate.
o 68209 - Other letting & operating of own or leased real estate.
o 68320 - Management of real estate on a fee or contract basis.
• Acceptable historic SIC codes (pre-2003) that may be in place for older companies are:
o 7012 - Buying & selling of own real estate.
o 7020 - Letting of own property.
o 7032 – Management of real estate.
• The company must be registered in England, Wales or Scotland.
• Ownership of the company must be in personal names. Subsidiaries, parent companies, LLPs, Trusts and offshore structures are not acceptable.
• Newly established SPVs are acceptable from day 1 of being set up.
• All directors of the company, all shareholders with a shareholding of 20% or more and any shareholders funding the property deposit (irrespective of shareholding) must be party to the mortgage (the “applicants”).
• Up to 4 applicants are acceptable.
• All applicants must provide a joint and several personal guarantee for the full loan amount and will be required to take independent legal advice.
• Applicants, in aggregate, must have at least 75% of the company shares and voting rights.
• Any shareholders who are not applicants must have a family relationship to the applicants.
• At least one applicant should be an existing residential homeowner occupier, living in accommodation tied to their employment, or living with a partner.
• There is no minimum income requirement for applicants. However, at least one applicant must be able to demonstrate a primary income (Employed, Self Employed or Retirement Income).
• Income must be in Pounds sterling.
• Applications are accepted for rental properties in England, Wales and Scotland.
• The maximum loan to value for Limited Company Buy to Let is 80% (purchase or remortgage).
The following exceptions apply:
• New Build Houses – 75%
• New Build Flats – 70%
• First Time Landlords – 75%
• Maximum individual loan £500,000.
• The minimum property valuation is £50,000 (irrespective of location).
• Maximum portfolio size of 10 mortgaged rental properties (including this application), irrespective of lender. This includes mortgages, either separately or in aggregate, in the applicant’s names, the borrowing limited company or any other limited company where an applicant owns more than 20% of the shares.
• Maximum of 4 rental properties can be mortgaged with the Society, whether BTL, Holiday Let, HMO or a combination (maximum £2m value). This includes mortgages, either separately or in aggregate, in the applicant’s names, the borrowing limited company or any other limited company where an applicant owns more than 20% of the shares.
• The applicants can only have one company financed to the Society.
• The Society will take a first legal charge over the property on an all-monies basis.
• The property must be let on an Assured Shorthold Tenancy (AST) or equivalent basis. The tenancy agreement must be in the name of the company and tenant.
• The property must not be occupied by any of the directors, shareholders or a family member of the directors and shareholders.
• The property must have a maximum of 5 bedrooms.
• Up to 75% LTV the property must achieve a minimum EPC rating of ‘E’. Above 75% LTV the property must achieve an EPC rating of A to C.
• Studio flats not accepted.
• Holiday Let, HMO and Multi-unit blocks are not accepted.
• Capital & Interest and Interest Only repayment types are acceptable.
• Gifted deposits are not acceptable.
Please see the relevant Limited Company Buy to Let product pages or Assessment of Rental Income section for applicable interest stress rates.
If an applicant is employed and currently on maternity leave (or has not yet started her maternity leave) then the Society will need to know her expected return to work date, salary, and expected childcare costs. If the return to work date is more than 8 weeks away this information can be confirmed by the applicant, otherwise the information should be confirmed by the employer (though discretion may be exercised).
In both instances a child will need to be taken into consideration towards affordability, and evidence of contingency funds to cover mortgage payments during maternity leave may be required.
A standard fee levied where an advance is redeemed before it reaches maturity.
The maximum loan to value on new residential properties is 90% on houses and 80% on apartments. For new Buy to Let properties the maximum loan to value is 75% on houses and 70% on apartments, and for Holiday Let 70% and 65% respectively.
All incentives provided by the builder must be disclosed at application. Although not an exhaustive list, incentives can include cash back on completion, payment of legal fees, payment of stamp duty, or the provision of kitchen / entertainment equipment. The standard UK Finance Disclosure of Incentives form can be downloaded from our website. In the absence of the UK Finance disclosure, all incentives should be included in the section “Are there any further matters considered essential for mortgage purposes?”
The valuation will reflect the price at which the property is readily saleable, irrespective of any incentives provided - the lower of purchase price or independent valuation.
All properties built within the last 10 years must be covered by an approved certification / insurance scheme.
For Architects and for all other schemes, please consult the Society’s UK Finance / Society’s Instructions to Solicitors (Lenders Handbook Part 2).
Architect’s certificates may be accepted, where they are signed by:
Evidence of appropriate valid personal indemnity insurance will be required and the certificate must be for the benefit of the borrower(s). The Architect must confirm that he has supervised the whole project.
The valuers guidance notes include a full list of acceptable construction types. Steel framed properties are not normally acceptable. However, these may be considered where the valuer states that re-saleability is not affected and the property is subject to a durable outer leaf (eg brick, block or stone). In addition, a Structural Engineer's report would be required in order to confirm that the structural frame is in satisfactory condition and free from corrosion where bolted to the floor slab.
Pre-fabricated reinforced concrete properties are not normally acceptable. However, these may be considered where the valuer states that re-saleability is unaffected and the property has been repaired under a PRC Home Limited approved scheme with a 10 year guarantee (eg Leeds City Council repair scheme with certification is acceptable).
Importantly all adjacent dwellings must have been repaired. For example, all homes in a terrace or both homes in the event of semi-detached.
Single and joint mortgage applicants are welcomed by the Society. Additional applicants (up to a combined total of 4 individuals) will be considered where the additional parties are close family members.
Caution must be exercised where there are 2 or more applicants and the purpose of the loan does not appear to benefit all parties proportionally. For example, where capital is raised in joint names is primarily for the repayment of debts owed entirely by one of the parties. In such instances, the Society reserves the right to amend criteria and recommends that each applicant seek independent legal advice.
Where the existence of other financial commitments may appear to compromise an applicant's ability to repay the proposed mortgage, the Society may request additional information.
The Society will usually consider other sources of income, where the combined value does not exceed 100% of household primary income. Other income is considered as illustrated in the following table:
| Type of Income | Considered |
|---|---|
| Child benefit/Child tax credit | Up to 100% |
| Working Family tax credit | Up to 100% |
| Employment and Support Allowance – Support Group | Up to 100% |
| Car allowance | Up to 100% |
| Maintenance (supported by court order/Child Maintenance Service (formerly CSA) order) | 100% |
Finally, net rental income can be used, subject to proof of payment for a period of not less than 12 months. Proof of payment can be obtained from bank statements, qualified accountant.
Additional information may be requested where an applicant has exceeded an agreed overdraft in the last 12 months, resulting in an unauthorised overdraft.
Regular and authorised overdraft may be taken into consideration, with a minimum monthly payment of 3% of the authorised overdraft applied as an outgoing within the affordability assessment.
The Society considers the following sources of income as ‘primary income':
| Basic Salary | Mortgage Subsidy |
| Large Town Allowance | Self-employed income (including dividends) |
| Rent Allowance | Pension income |
Additional information is available on sole traders & partnerships, under the heading 'Sole Traders / Partnerships', information on contractors under the heading 'Short Term Contracts' and information on directors of limited companies under the heading 'Directors of Limited Companies (including Limited Partnerships / LLPs'.
Where pension income is being considered as part of the application a pension statement will be required. If this statement is dated after 31 March 2020 it will be accepted at face value. However, if dated prior to 31 March 2020 the following reductions to pension income will be applied as illustrated in the following table:
| Retirement Date | Reduction |
| Within 5 years | 5% |
| Within 5-10 years | 10% |
| Over 10 years away | 0% |
Credit Bureau data is used to confirm satisfactory payment of existing credit commitments. In the unlikely event that this information is not available, confirmation must be obtained from existing and previous lenders that commitments have been met consistently for a minimum of the previous 12 months.
The most recent mortgage statement provides acceptable proof of mortgage payment, subject to statement date within 6 months of new mortgage application.
Properties which are above, adjacent or near to commercial premises may be acceptable subject to the following:
The proximity of the commercial use must not affect the quiet enjoyment of the property. Consideration should be given to the location of the property. The property must be located in a desirable area with good demand, readily saleable and readily marketable.
For example, properties which are adjacent to, or in close proximity to a Public House, Cattery, Kennels, restaurant or food outlet, petrol station, laundrette or pet shop would not be deemed as suitable security. This is not an exhaustive list.
Properties with two kitchens are generally unacceptable. However, executive type houses with second kitchens are considered suitable as long as the property cannot be let as separate units. Utility rooms are not considered as a second kitchen.
Mortgages on a property which has been converted (eg multiple apartments) will be considered, subject to solicitor confirmation that the necessary planning permissions were obtained and valuer confirmation that the conversion is of a high quality.
Apartments may be subject to additional criteria (see Leasehold Flats / Maisonettes).
A 'retention' may be applied where the valuer identifies important work to be undertaken. The retention will be discharged upon completion of the necessary work or acceptance of specialist reports.
This section does not apply to Retirement Interest Only mortgages.
If the residential mortgage is either Interest Only or Part and Part (combination of Interest Only and Capital and Interest)the borrower should have ability to repay the capital at the end of the mortgage term. We accept a number of repayment strategies.
Sale of a mortgaged property
Sale of another property
Pensions
Regulated Investments (e.g. Endowment Policies)
Lump sum savings and investments (e.g. Bonds, Unit trusts)
Stocks and Shares
Things to consider:
We do not lend on Interest Only for Shared Equity, Shared Ownership or for lending into retirement.
It is increasingly common for properties to have clauses which restrict who may purchase a property. These clauses are typically designed to maintain the supply of local affordable housing. Restrictions typically require the buyer to already live within a defined area or meet local salary restrictions, albeit there are many other types of restrictions and specific clauses can vary by location.
The Society will accept the following types of restrictions:
However, acceptance is subject to one (or more) of the following:
Full details are provided in the Solicitors Guidance notes. Any restrictions should be disclosed in the application in order to ensure the valuer is fully informed in their assessment of the property. This information should be included under ‘other information.’
The Society will not consider any other clauses/restrictions than those listed above.
Applicants must usually:
Non-UK Citizens must have indefinite leave to remain or right to reside evidenced by a passport stamp, settled or pre-settled status under the EU Settlement Scheme, or confirmation from the Home Office. For non-EU Nationals the applicant’s permanent right to reside should be evidenced and confirmed.
The Society welcomes applications for Retirement Interest Only (RIO) mortgages. Please see our range of RIO products.
The monthly mortgage payments will consist only of interest on the amount borrowed. The borrower is required to make these payments each month for the life of the mortgage.
The loan will be repaid from the proceeds of the sale of the property on the occurrence of a specified life event, as defined in the FCA Handbook, such as death or moving into long-term care.
Where there are joint borrowers the life event is triggered by the surviving borrower and/or last borrower residing in the property.
Lending Criteria
Income assessment
Affordability will be assessed on the applicant’s ability to maintain mortgage payments for the life of the mortgage, using the lower of the following:
For joint borrowers, affordability will be assessed on the lowest earner to ensure ability of a surviving borrower and/or last borrower residing in the property to maintain payments.
Retirement age is defined as either the applicant's stated retirement age or 70 years, whichever is the earlier. When in retirement employed or self-employed income should not be used to assess affordability.
Please note:
The income used to assess affordability should be sustainable for the life of the mortgage. Acceptable income types include:
Our underwriters may ask for more details to support the application, where needed.
Income from additional employment will be considered in line with our standard income assessment. The details of both jobs should be disclosed including (1) income, (2) length of employment, (3) nature of employment, and (4) number of hours worked per week.
At this time the Society does not offer any schemes specifically designed to support self-build or custom build during construction. However, we will subsequently lend on finished properties as 'New Build.'
Where a business has traded for at least 2 years, the application should be supported by accounts or a fully completed Accountants Certificate for the last 2 years or the 2 years tax calculations (SA302s) and the tax year overviews.
The Society will look to support self-employed individuals, where the business is prospering. However, the Society will also consider applications where profits have reduced, subject to the underwriter being satisfied about the sustainability of income from the business (cases where the figures show a >10% decrease year on year will be declined). Speak to your Business Development Manager for further guidance.
The affordability assessment will be based on the average profitability over the period for which financial accounts are provided.
Accounts should be prepared by a qualified Accountant and, if considered necessary by the Underwriter, proof of the continuing existence of the business may be requested. In order to support the application, if there is a significant % decrease in figures please provide additional information at point of application (potentially using an Accountant’s Certificate with notes provided by the accountant) in order to help expedite the application and reduce the probability of additional questions
Accounts or accountants certificate are acceptable evidence of earnings, where signed by a qualified accountant from the list below:
The Society will not consider interest only lending or lending into retirement for shared equity / ownership.
Shared Ownership and Shared Equity are not interchangeable and possess different characteristics. These can be summarised as follows:
Shared Ownership - Borrower acquires a percentage of the property and pays rent to the Landlord on the remaining interest in the property.
Shared Equity - Borrower purchases 100% of the property but only pays a percentage of the market value with the remaining value provided by an equity sharing lender. Typically, no rent is payable.
The Society does not lend on Shared Ownership schemes in Scotland, however it does support the shared equity 'LIFT' scheme (formerly Homestake).
The lease must allow an adequate mortgage protection clause that protects the Society from losses in the unlikely event that the property is taken in to possession, or achieved by way of a suitable Deed of Postponement / Priority. The Mortgage Protection Clause must cover the initial loan and all additional lending / staircasing up to 100%.
Where Shared Ownership is a subset of a larger development, we will lend on the greater of 25% or up to 10 of the Shared Ownership properties. Otherwise, the Society operates a maximum 25% exposure to any one development.
In both scenarios the Landlord or equity sharing lender benefit from any change in the value of the property; the financial benefit is proportional to their share of the property.
The Society will lend on the Government Help to Buy:equity loan scheme, available in England, Scotland, Wales, London and In Scotland, the Society will also lend on the 'LIFT' scheme.
Applicants employed on a short term contract will be considered where the contract has already been renewed at least once with the same employer. Alternatively, where there is an established record of employment covering a minimum of 12 months within the same field of business.
Affordability assessment will be based on net profit or the individual's share of total profits. Full financial accounts are required for underwriting (see Self Employed).
The Society operates a panel of solicitors or licensed conveyancers. Where the solicitor/licensed conveyancer chosen to act on behalf of the applicant is on the Society's panel, the Society will also instruct them to act on its behalf. If, for any reason, the Solicitor / Conveyancer is not acceptable to the Society, then the Society will instruct its own Solicitors at a cost to the applicant.
Builder / Vendor Gifted Deposits: All incentives should be disclosed to the valuer as part of the application. The valuer will consider the total property valuation recognising incentives; standard RICS process.
It is acceptable for a builder/vendor to provide cashback or contribution towards the deposit, provided that (i) the incentive is disclosed appropriately and (ii) the value does not exceed 5% of the purchase price or valuation, whichever is the lower.
If the cashback/deposit is greater than 5%, the excess will be deducted from the price and our lending will be based on the reduced value.
Irrespective of builder/vendor cashback/gifted deposit, the Society expects a personal contribution from the buyer of at least 5% of the gross purchase price or valuation, whichever is the lower.
Family Purchase: Where the property is being purchased from a close family relative (who must be a resident in the UK and will be subject to routine bankruptcy searches) and therefore sold at a discount to the market value, the Society will consider lending up to 100% of the purchase price. The LTV for product selection will be calculated using loan amount as a percentage of open market value.
The Society will not consider applications for simultaneous capital raising / home improvements.
Gifted Family Deposit: Gifted deposits from family members as defined by the regulator (spouse, parent, grandparent, sibling, child or grandchild) will be considered. The individual gifting the deposit must be resident in the UK and will be subject to routine bankruptcy searches. The Society requires completion of the ‘Gifted Deposit Form’ which can be obtained from our web site and should be submitted with the application.
Accelerated Deposit Schemes: A deposit saved using an Accelerated Deposit Scheme is acceptable provided the arrangement is with a Registered Housing Associations, Registered Social Landlord, UK Government or Local Authority. Subject to the following:
HTB ONLY
All incentives should be disclosed to the valuer as part of the application UK Finance Disclosure Form. Financial incentives up to 5% of the full purchase price are acceptable in principle. Please see below the types of financial incentives that would/ would not be acceptable:
Non-financial incentives such as property upgrades i.e. carpets, kitchen appliances, white goods, fitted furniture, landscaping and Builders Options vouchers (that are to be used on property upgrades) are acceptable in principle and will be considered on a case by case basis.
A property of standard construction will typically meet the following criteria and are appropriate for mortgage lending
Walls – Solid (min 230mm) or cavity (min 280mm), built in brick, natural stone, reconstituted stone, concrete block, cob or flint.
Pitched Roof – Typically timber, but if the property is of acceptable construction, then steel frame covered in slate, thatch, tile or copper are usually accepted. Modern lightweight ‘mock slate’ is general accepted also.
Flat Roof – Accepted where covered in asphalt, felt, copper, lead or zinc.
Studio flats are acceptable for residential applications, subject to the following:
For the avoidance of doubt, studio flats are not acceptable for Buy to Let purposes.
Properties of unusual construction may be considered by the Society, subject to a review by the Society's preferred valuers and confirmation that the property provides adequate security.
The minimum acceptable property valuation is £50,000 on Residential Buy to Let and Holiday Let properties, and £100,000, £250,000 in London on HMO properties.
The Society offers a choice of valuation types:
Mortgage Valuation Report – The valuation is prepared for the Society (not for the borrower). It is required as a minimum and is carried out by a valuer on the Society's panel. It only answers the Society's questions concerning whether the property is suitable security for lending purposes. It does not imply the price is reasonable or if the property has any defects.
Homebuyer report - Designed as an economy service. It differs from a Building Survey in two major respects (1) It is intended only for particular types of home i.e. houses, flats and bungalows, which are of a conventional type of construction and in apparently reasonable condition, (2) It focuses on essential defects and problems which are urgent or significant and have an effect on the value of the property.
A Homebuyer Report can be arranged for you by the Society. However, if you decide to instruct your own valuer who is not on the Society's panel, you will still have to pay for the Society's Mortgage Valuation Report.
Building Survey & Valuation - A Building Survey is suitable for all residential properties and provides a full picture of their construction and condition as far as can be assessed by visual inspection. The scope of the inspection can be tailored to suit your own individual requirements and the surveyor can be asked to comment on individual aspects that may be of concern to you.
Due to the detail and individual nature of a Building Survey, the Society would be more than happy to provide you with details of your local office of Society approved chartered surveyors. They will discuss your requirements and carry out the survey together with the Leeds Building Society valuation report. If you choose to instruct your own surveyor you will still have to pay for a mortgage valuation report from the Society's approved valuer.
All occupants who fit the below criteria can be excluded from the affordability calculation:
The following must be provided to exclude occupants from the affordability calculation:
The Declaration of Occupier form can be accessed on our 'Forms' page.
