Birmingham Midshires Buy to let lending criteria

The notes listed below show some of the lending criteria for Birmingham Midshires. You should NOT rely on this information. Please contact us to discuss your Enquiry

Last Checked on 10th September 2020.

Birmingham Midshires

https://www.bmmortgages.co.uk/

Rental Calculation

Purchase, Let to Buy, remortgage with capital raising and further advances:
2 year fixed/tracker – 5.5% or pay rate + 2% whichever is higher.
5 year fixed – 5% or pay rate +0.5% whichever is higher.

(For further advances to qualify for 5 year stress rates the total loan, including all existing balances, must be fixed for 5 years or more at point of application)..

Like for Like remortgage (Buy to Let / Let to Buy):.
2 year fixed/tracker – 5.5% or pay rate + 0.5% whichever is higher.
5 year fixed – 5% or pay rate +0.5% whichever is higher.

Rental cover ratio’s (RCR).
All applicants are basic rate tax payers – 125%.
One or more applicants are higher / additional rate tax payers – 145%.

Note:
Higher / Additional rate tax payers are customers whose total earned income plus 80% share of the gross rental income for all properties that the applicant will own on completion exceeds £50,271 pa (£43,663 pa in Scotland).

If the application is for a Portfolio Landlord, the total portfolio (including the subject property) must achieve a minimum rental cover of 145% stressed at 5.5% and be no more than 75% LTV. (Minimum joint income of £30,000 pa).

Use the Birmingham Midshires rental calculator 

Occupation

Minimum Time Employed.

Employed applicants will be expected to have been employed for a minimum of 3 months in their current job and had 12 months continuous employment.

 Employers Reference

No.

 P60 Not generally required.

 Payslips.

 The latest payslip (at time of application) is required to verify income (this applies whether the applicant is paid weekly, 4 weekly, fortnightly, or monthly).

 The payslip must confirm company’s name, Customer’s surname and initial as a minimum requirement.

 Hand written payslips are not acceptable.

 Additional payslips may be required where the latest payslip does not represent a true reflection of the applicant’s income.

 Self Employed Minimum Trading Period.

  Self-employed applicants must be self-employed for a minimum of 2 years and be able to to provide at least 2 years worth of trading figures.

 Applicants who have transitioned from employed to Self Employed (in the same line of work) must still meet the Self Employed criteria.

 Accountants Letter / Certificate Not accepted.

 Tax Assessment.

  2 years Inland Revenue Self Assessment (SA302’s) with corresponding Tax Year Overviews.

 2 Years Accounts Where SA302’s are not available, latest 2 years accounts are Acceptable.

 Projected Accounts accepted No.

 Contract Workers Accepted.

  Sub Contractors, Fixed/short term contracts and Agency workers.

 Sub Contractors, Fixed/short term contracts and Agency workers.

 If tax is paid by the company, the customer is to be treated as employed.

 The applicant must have continuous employment of 12 months or more with 6 months of the contract remaining or 2 years continuous service in the same type of employment.

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

 IT and High Value Contractors For IT contractors on any income and other contractors whose income is more than £500 per day or £75,000 per year, whether Employed, Self Employed, or operating as an Umbrella Company, we’ll accept the gross value of the contract as evidence of income.

 All applicants must have: 12 months or more continuous employment in their current contract with six months of the contract remaining, or Two years continuous service in the same type of employment (within the last two years) The following details should be keyed: Employment status as ‘Employed‘ Type of employment as ‘Fixed, short term or rolling contract’ Occupation type as ‘Professional’ Job title as either ‘IT Contractor’ or ‘High Value Contractor’ Income as the gross value of the contract When calculating the annual amount, day rates should be multiplied by 5 then 48.

 Hourly rates should be multiplied by the number of contracted hours per day then annualised using the same calculation as day rates If the contract isn’t available, employment status should be keyed as ‘Self Employed’ and Tax Calculations and corresponding Tax Year Overviews may be used to verify income.

 Evidence of the contract value and duration should be retained for all cases and only submitted if income verification is requested.

 When submitting documentation, the following information should be provided: Full value of contract or rate of pay and contracted hours / days Customer name and / or their company names, and evidence of ownership Name of the company the applicant is contracted to, if applicable Start and end date of the contract Customer signature / electronic signature The only scenarios where an IT/High Value Contractor needs to be treated as self employed are where the customer: More than one contract Applicant has set up a limited company and employs other contractors Construction Industry Scheme Contractors (CIS) Applications from customers employed on a Construction Industry Scheme (CIS) Contract will be considered.

 An average of the latest 3 months income should be used and evidence of the income for these applicants must be provided.

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

 Nursing Bank Applicants who pay their own tax should be treated as Self Employed.

 Applicants who do not pay their own tax can be considered as employed but must have 18 months or more continuous employment with the current agency, or 2 years continuous service (for at least the last two years as at the date of application) in the same type of employment.

 Supply Teachers Applications must have a current continuous employment of 12 months or more with 6 months of the contract remaining or the customer has 2 years continuous service in the same type of employment.

 Professional Sports People Applications will be considered from Professional Sports People where either continuous employment of 12 months or more with 6 months of the contract remaining or 2 years continuous service (for the last two years as at the date of application) in the same type of employment can be confirmed.

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

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

 Zero Hours Contracts Applications from customers employed on a Zero Hours Contract will be considered.

 The customer must have been employed on a Zero Hours Contract for a minimum of 12 months.

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

 Where the customer has been employed on a Zero Hour Contract by different employers, but for the same type of work, this can be considered continuous employment.

 Contract Workers Minimum Time Employed Applicants will normally be expected to be on a permanent contract and to have been with the current employer for at least 6 months.

 Additional Info – Contract Workers For IT Contractors on any income, and other contractors whose income is more than £500 per day or £75,000 per year, whether Employed, Self Employed or operating as an Umbrella Company, we’ll accept the gross value of the contract as evidence of income.

 All applicants must have: 12 months or more continuous employment in their current contract with six months of the contract remaining, or 2 years continuous service in the same type of employment either Employed/Self Employed (within the last two years).

 Retired Applicants.

  We require latest Bank statement.

 Where gross pension income cannot be ascertained from the bank statement the latest pension statement dated in the last 12 months or State Pension Forecast statement should be requested.

 Latest P60 is also accepted.

 The following income types will be taken into consideration in the affordability calculation; State Pension Private Pension (including Company/Occupation) Pension Tax Credits Fixed Annuity Payments (private) War Widower Pension War Disablement Pension Widows State Pension.

 Self-Cert Applicants No.

 Zero Hour Contracts.

  Applications from customers employed on a Zero Hours Contract will be considered.

 The customer must have been employed on a Zero Hour Contract for a minimum of 12 months.

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

 Where the customer has been employed on a Zero Hour Contract by different employers, but for the same type of work, this can be considered continuous employment.

 Bank Statement If requested Landlord Reference If requested Mortgage Statement If requested Previous Lender’s Reference If requested Proof of residence  If the applicant(s) is/are not on the voter’s roll at the current address, proof of residence must be provided: eg  bank/building society statement, credit card statement, or Council Tax statement.

 Proof of ID Yes.

Additional Reference Information If requested.

Applicants.

Income criteria The customer’s maximum borrowing is calculated using our affordability model.

Affordability.

Affordability is assessed using the anticipated rental income from the property.

 In addition to rental coverage, we’ll assess personal income when making a lending decision.

 It’s therefore important that the customer’s income is keyed accurately as it may affect the  decision.

 Affordability is assessed using the anticipated rental income from the property.

 In addition to rental coverage, we’ll assess personal income when making a lending decision.

 It’s therefore important that the customer’s income is keyed accurately as it may affect the decision.

 We expect to see that the applicant can afford their personal commitments so we can be confident that the lending remains sustainable in the event of tenant voids or maintenance and repair costs incurred.

 An application may be declined where we determine that there is insufficient disposable income to support the borrowing and the customer’s personal commitments.

 Our rental cover calculation provides for an excess of rent compared to the actual mortgage payment to enable the landlord to cover such eventualities.

 However if the personal affordability is stretched this may not leave them with the capacity to retain such savings.

 We will also take into consideration the additional cost of an increased tax liability for some customers as a result of tax legislation.

 The legislation will begin to take effect in 2017 and be fully implemented by 2020 and as a responsible lender we must consider future sustainability.

 An application may be declined where there would be insufficient surplus income to support the borrowing and our customer’s personal commitments after 2020.

 We understand that the personal income may not reflect the overall financial picture for the applicant and they may  have other assets and savings available.

 We also understand that  the BTL may be in a single name whilst personal financial  commitments may be held jointly with another party.

 In all cases  where the application is subject to manual underwriting (including  all Portfolio Landlord applications), a fully completed Customer  Profile Form (pdf, 138kB) must be submitted.

 This enables you to  help us understand the full background to the proposed transaction  and we can then make an informed lending decision.

 Useful information which we will require includes: How the customer maintains their commitments How they’ve built up any reserves,  including the deposit Whether they have previous experience of  Buying to Let.

Rationale for sole applications where finances are joint.

Information about the business for Self Employed customers.

Regular Overtime The payments must represent a regular and sustainable feature of the applicant’s income.

Guaranteed Overtime The payments must represent a regular and sustainable feature of the applicant’s income  Overtime (before or after calc) Before  Bonuses The payments must represent a regular and sustainable feature of  the applicant’s income. 

Maternity Leave Policy Income used in the assessment can be based on the customer’s  salary before starting leave providing they will return to work on the  same terms.

 Confirmation that the customer will return on the same  terms must be obtained and can be verbal from the Broker.

  Other income Some income types accepted

FTB Not accepted

Remortgage

Remortgage applications not accepted where the customer has

owned the property for less than 6 months

Maximum no of Applicants 4, An applicant does not need to be an owner occupier but at least one applicant must currently own a property in the UK which will need to be validated before an offer can be made. All other applicants must either currently own a property in the UK or have previously owned a property in the UK which can be evidenced with land registry.

Maximum age 1st Applicant 80

Minimum age 1st Applicant 25

Maximum age 2nd Applicant 80

Minimum age 2nd Applicant 25

Minimum term 5 Years

Maximum term 40 Years

UK Tax Payers Compulsory

Non Residents Not accepted

Foreign Nationals

Applicants from the EEA should have been resident in the UK for at

least 12 months. Foreign Nationals need to have been in the UK

for 3 years, with 3 years’ left on their visa or permanent rights to

remain and subject to our underwriting criteria.

Foreign Citizens Accepted Yes –

Applicants from the EEA should have been resident in the

UK for at least 12 months. Foreign Nationals need to have been in

the UK for 3 years, with 3 years’ rights to remain on a visa and

subject to our underwriting criteria.

Expatriates Accepted

We do not currently accept new business applications from

expatriate residents. Where an Expat has returned to the UK, they

would need to have been employed for 12 months or Self

Employed for 2 years.

Diplomatic Immunity No

Guarantors Allowed No

Parental Assistance No

Armed Forces Personnel Yes –

CCJ’s Outstanding Credit score dependent

Defaults Credit score dependent

Arrears Credit score dependent

Missed Payments Credit score dependent

Bankruptcy Discharged more than 6 years ago

IVAs Discharged more than 6 years ago

Repossession No

Product

Repayment Yes

Endowment Yes

PEP Yes

Pension Yes

Interest Only (no repayment

vehicle)

Acceptable for BTL and LTB

Interest Only (with repayment

vehicle) Yes

ISA Yes

Sale of Property Yes

Sale of Other Property Yes

Life Cover Requirements Customers to satisfy themselves that they have made proper

provisions for cover

Split Loan Yes

Overpayments We do currently allow 10% overpayment of the capital balance

without incurring any early repayment in a 12 month period.

Business purposes No

Buy freehold 75% BTL

Buy land 75% BTL

Car 75% BTL

Debt consolidation 75% BTL

Dependants home 75% BTL

Education fees 75% BTL

Extend Lease 75% BTL

Holiday 75% BTL

Holiday home 75% BTL

Home Improvements

Where the loan purpose is for Home Improvements for a BTL property, the ‘BTL Property Improvement’ loan purpose should be used. Max LTV 75% If the ‘Home Improvements’ option is selected, we will assume this is for Home Improvements to a residential (non BTL) property, therefore Consumer BTL regulation will be applied.

Where the loan purpose is Business BTL, the application will be subject to further decision tree questions before we can confirm how the application will be regulated.

Investment 75% BTL

Marital settlement 75% BTL

Medical expenses 75% BTL

Refinance 75% BTL

Second home 75% BTL

Self build home No

BTL Minimum age 1st applicant 25

BTL Minimum age 2nd applicant 25

BTL Maximum age 1st applicant 75 at time of application and 80 at end of term

BTL Maximum age 2nd applicant 75 at time of application and 80 at end of term

BTL Applicant Minimum salary No Minimum

BTL Minimum Term 5

BTL Maximum Term 40

BTL Minimum property value £50,000

BTL Maximum LTV 75%

BTL Rental Income Must be 125% of annual interest / 145% for higher rate tax payers

BTL Remortgage Yes

BTL UK Tax Payers Yes

BTL Foreign Citizens Yes

BTL Expatriates No

BTL Diplomatic Immunity No

BTL Guarantors No

BTL Parental Assistance No

BTL Maximum Portfolio Value £2m across Lloyds Banking Group — £3mill

BTL Max no. of properties with lender

3 across Lloyds banking group – 5

BTL First Time Buyer No

BTL Retired Applicants Yes

BTL First Time Landlords

First Time Landlords are acceptable but at least one applicant must currently own a property in the UK which will need to be validated before an offer can be made.

 All other applicants must either currently own a property in the UK or have previously owned a property in the UK which can be evidenced with the land registry.

 Our criteria and products are the same for first time and experienced landlords.

 Where possible, we will use the credit reference search to validate property ownership.

 If this information is not available via the credit reference file or the property is unencumbered we may request the documentation listed below.

 England and Wales: Land Registry certificate dated within the last three months which must show at least one of the applicants names, or A copy of a recent mortgage statement dated within the last three months which must show at least one of the applicants’ names, or A copy of a mortgage statement over three months old plus, last three months bank statements confirming payment.

 Both must show at least one of the applicants’ names Scotland: Land Registry certificate dated within the last three months.

 This must show at least one of the applicants’ names.

 Where no date is available on the certificate, adequate proof that this was requested within the last three months is acceptable (either from the Land Registry or the solicitor), or A copy of a recent mortgage statement dated within the last three months which must show at least one of the applicants’ names, or A copy of a mortgage statement over three months old plus last three months bank statements confirming payment.

 Both must show at least one of the applicants’ names Northern Ireland: Land Registry certificate dated within the last three months.

 This must show at least one of the applicants’ names.

 Where no date is available on the certificate adequate proof (either from the Land Registry or the Solicitor) that this was requested within the last three months is acceptable, or A copy of a recent mortgage statement dated within the last three months which must show at least one of the applicants’ names, or A copy of a mortgage statement over three months old plus last three months bank statements confirming payment.

 Both must show at least one of the applicants’.

 BTL New Build accepted Yes

BTL New Build House Yes

BTL New Build Flat Yes

BTL AST over 12 months Yes, but also accept a tenancy up to 3 years

Consumer BTL Accepted. These are not regulated

BTL DSS Let YES

BTL HMO accepted

Properties subject to Local Authority Homes in Multiple Occupation

(HMO) licensing may be acceptable, subject to the valuer’s assessment of suitability based on the following requirements: The

maximum LTV is 75%, with loans permitted between 25,001 and £1million Large properties i.e. where there are more than five

lettable rooms, in an area where letting arrangements are predominantly multiple-tenancy, are not acceptable.

1.Letting arrangements must be via a single tenancy agreement. Multiple-tenancy arrangements i.e. where individual tenants agree separate tenancies with the landlord, are not acceptable

2.Maximum of five unrelated tenants

3.The property must be

suitable for standard residential occupation

4.Institutional type properties, for example hostel accommodation/bedsits/shared

accommodation comparable to halls of residence, are not acceptable

5.Large properties i.e. where there are more than five lettable rooms, in an area where letting arrangements are

predominantly multiple-tenancy, are not acceptable.

BTL Housing Association No

BTL Local Authority NO

BTL Regulated offered No

BTL Sitting Tenant Non Owner Occupier accepted

BTL Student Let Tenants who are students – Up to five students are permitted on one AST agreement

BTL Holiday Let No

BTL LTD Co No

Let to Buy No (except LTB specific products)

Help to Buy – Equity Loan No

Help to Buy – Mortgage Guarantee No

Forces Help To Buy Yes – Refer to lender

NewBuy Guarantee Scheme No

Fast Track No

Proof of Deposit If requested

Gifted Deposit Accepted subject to criteria

Builder Deposit All Builder Cash Incentives must be declared at point of sale

Top Ups Yes

Bridging Finance No

Equity Releases Yes

Second Charges Yes

Further Advances Yes – minimum £5k

Negative Equity No

Semi / Full Commercial No

Offset products / facility No

Transitional Arrangement Yes

Lend into Retirement

Retired customers – Latest Bank statement. Where gross pension income cannot be ascertained from the bank statement the latest pension statement dated in the last 12 months or State Pension Forecast statement should be requested. Latest P60 is also acceptable

Portable Yes

Notes

A Portfolio Landlord application is where the customers have 4 or more mortgaged BTL properties including the new transaction. This is based on the total number held by all customers party to the application. E.g. Applicant 1 has 2 mortgaged BTL properties and

applicant 2 has 1 mortgaged BTL property – they are buying a new

property together and so have 4 in total and the application is

classified as a Portfolio Landlord. Mortgaged BTL properties

include those held in a personal name, Limited Company or any

other legal entity Key criteria changes for Portfolio Landlords • No

more than 10 BTL mortgaged properties including the new

application to BM Solutions. • Minimum earned income of 30k –

Income defined as; earned income from employment or

self-employment (including taxable profit from the property

portfolio); pension income; investment income • Maximum

aggregate portfolio of 75% LTV • Minimum aggregate portfolio

Rental Cover Ratio of 145% stressed at 5.5%. • Unencumbered Let

Property – Not included in the count of mortgaged BTL property –

Must be declared on the Customer Profile Form – and will be

included within the assessment of aggregate LTV and Rental

Cover Ratio. For support please visit BMSolutions.co.uk or speak

to your Business Development Manager.

Property

Agricultural Restrictions Subject to valuer’s comments

Back to Back No

Brick on Wood Subject to valuer’s comments

Conventional Brick / Tile Subject to valuer’s comments

Concrete Subject to valuer’s comments

Flat Above Shop Subject to valuer’s comments

New Build Flat Yes up to 75%

New Build House Yes up to 75%

Flat Converted Accepted

Ex Local Authority Flat No

Ex Local Authority House Subject to valuer’s comments

Freehold House Subject to valuer’s comments

Freehold Flat Subject to valuer’s comments

Flat Purpose Built Subject to valuer’s comments

Flat Storeys Subject to valuer’s comments

Flying Freehold Subject to valuer’s comments

Feuhold Subject to valuer’s comments

Ground Floor with/without lift Subject to valuer’s comments

Garden Floor with/without lift Subject to valuer’s comments

Minimum Lease on Application 70 Years

Minimum Lease on Redemption 30 years

Leasehold Accepted

Minimum Property Value £50,000

Let to Buy Accepted

Mobile Home No

Maisonette Subject to valuer’s comments

Multiple Let

The maximum number of occupants is 5. They must all be party to

the agreement. It is the landlords responsibility to ensure that all

legislation is complied with including (but not restricted to)

legislation relating to Tenancy Deposit schemes and HMOs

(Houses in Multiple Occupation). The maximum number of

bedrooms allowed for a Buy to Let property is 5. Multiple tenancies

(where each tenant signs a separate agreement and/or has

separate facilities) are not acceptable

More than one kitchen Subject to valuer’s comments

More than 6 bedrooms Not for BTL

NHBC required

The property must be subject to one of the following building

control and monitoring requirements: Building Standards Indemnity

Scheme from a warranty provider accepted by Lloyds Banking

Group: NHBC Premier Guarantee – includes the LABC New Homes

Warranty and LABC Hallmark Scheme Building LifePlans Ltd (BLP)

Checkmate Buildzone Advantage HCI Global Home Warranties

International Construction Warranties (ICW) Protek Q Assure Build

Aedis FMB Insurance Build Assure

No Bathroom No

No Indoor WC Subject to valuer’s comments

Occupied Subject to valuer’s comments

Part Occupied Subject to valuer’s comments

Right to Buy No

Part Commercial No

Second Home No

Holiday Home No

Home for Dependant No

Self Build No

Shared Equity No

Shared Ownership No

Solar Panels Subject to valuer’s comments

Studio Flat Yes

Studio House Subject to valuer’s comments

Thatched Roof Subject to valuer’s comments

Non Standard Construction Subject to valuer’s comments

Steel Frame Subject to valuer’s comments

Prefabricated Concrete Subject to valuer’s comments

Timber Frame Subject to valuer’s comments

Wholly Timbered Subject to valuer’s comments

Resale Price Covenant Schemes No

England Yes

Scotland Yes

Wales Yes

Northern Ireland Yes

Southern Ireland No

Miscellaneous

Solicitors

Listed in Law Society’s Directory, min 2 partners.

Additional borrowing without approval No

Additional secured borrowing Yes