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Second Charge Lending Criteria 1.1

We pride ourselves in being transparent with our criteria so you know where you stand when submitting a case to us. Search for keywords or download the PDF to help find the answers you are looking for.

Displaying 9 of 9 categories.

Loan

Minimum net loan

£5,000

Maximum gross loan £500,000
Term Minimum 3 years
Maximum 35 years
Repayment method Capital and interest repayment basis only
Maximum LTV 85%
Time resided in property

Minimum 3 months

Increase in value since purchase If the property was purchased less than 12 months ago and the value has increased over 20% of the purchase price, an explanation will be required to give the Bank comfort and an indemnity policy may be required. If there is no plausible reason for the increase and it is evident that the property was transferred undervalue, we will not be able to proceed
Minimum net loan

£5,000

Maximum gross loan £500,000
Term Minimum 3 years
Maximum 35 years
Repayment method Capital and interest repayment basis only
Maximum LTV 85%
Time resided in property

Minimum 3 months

Increase in value since purchase If the property was purchased less than 12 months ago and the value has increased over 20% of the purchase price, an explanation will be required to give the Bank comfort and an indemnity policy may be required. If there is no plausible reason for the increase and it is evident that the property was transferred undervalue, we will not be able to proceed

Loan Purpose

Acceptable purposes
  • Home improvements - If the applicant is capital raising more than 30% of the value of the property for home improvements (or home improvements works of more than £75,000) and/or completing structural works including removal of internal walls and extensions, we will require:
    • A high-level monetary breakdown with consideration of contingency costs and details of any interim rental payments, if moving out of the property

  • Debt Consolidation - Where any part of the loan is being used for material unsecured debt consolidation greater than £35,000 and where the disposable unstressed income is over £1,000 per month. We will require:
    • An explanation for the debt
    • Last 2 months’ bank statements reflecting day to day activity. If there is clear evidence that the debt has been accrued to support general day to day life expenditure, then we will be unable to proceed
    • All debt consolidation to be repaid directly from the advance
  • Business purposes (subject to a satisfactory reason for the funds being raised)
  • Repay a tax bill
  • Holiday
  • Deposit for purchase of additional personal property i.e. 2nd home/Holiday Home – Require the monthly payment for any additional borrowing from either the Mortgage in Principle or Mortgage Offer, which is to be added to the expenditure along with any running costs associated
  • Deposit for BTL property – Require either the BTL Mortgage in Principle or BTL Mortgage offer required to provide evidence that the new BTL property has sufficient rental to cover the mortgage commitment
  • Other purposes - Transfer of equity, repay Help to Buy, lease extension, car purchase, gifting money to a child. These may be subject to additional requirements
Unacceptable purposes
(including but not limited to)
  • Bridging finance
  • Debtor, creditor, supplier arrangements
  • Financial speculation
  • Gambling
  • Business start-up
Acceptable purposes
  • Home improvements - If the applicant is capital raising more than 30% of the value of the property for home improvements (or home improvements works of more than £75,000) and/or completing structural works including removal of internal walls and extensions, we will require:
    • A high-level monetary breakdown with consideration of contingency costs and details of any interim rental payments, if moving out of the property

  • Debt Consolidation - Where any part of the loan is being used for material unsecured debt consolidation greater than £35,000 and where the disposable unstressed income is over £1,000 per month. We will require:
    • An explanation for the debt
    • Last 2 months’ bank statements reflecting day to day activity. If there is clear evidence that the debt has been accrued to support general day to day life expenditure, then we will be unable to proceed
    • All debt consolidation to be repaid directly from the advance
  • Business purposes (subject to a satisfactory reason for the funds being raised)
  • Repay a tax bill
  • Holiday
  • Deposit for purchase of additional personal property i.e. 2nd home/Holiday Home – Require the monthly payment for any additional borrowing from either the Mortgage in Principle or Mortgage Offer, which is to be added to the expenditure along with any running costs associated
  • Deposit for BTL property – Require either the BTL Mortgage in Principle or BTL Mortgage offer required to provide evidence that the new BTL property has sufficient rental to cover the mortgage commitment
  • Other purposes - Transfer of equity, repay Help to Buy, lease extension, car purchase, gifting money to a child. These may be subject to additional requirements
Unacceptable purposes
(including but not limited to)
  • Bridging finance
  • Debtor, creditor, supplier arrangements
  • Financial speculation
  • Gambling
  • Business start-up

Customers

Age

Customers must be a minimum of 21 years of age at the start of the mortgage and no older than 85 years of age at the end of the loan term

Customer type

Individuals (UK, EU and other foreign nationals residing in the UK, see ID section)

Maximum number of applicants

2

Power of attorney

Unacceptable

Non-owner occupiers
  • Any occupier aged 17 to 69 residing in the property and not party to the loan, will need to sign a Waiver Consent form
  • Any occupier who is co-habiting/partner or aged 70 and above and not party to the loan, will be required to sign an Occupier Deed of Consent form and have this completed and witnessed by a solicitor or a Licensed Conveyancer

The above is not a requirement in Scotland

Credit status
  • Mortgage arrears/BTL mortgage arrears / Secured Loan/Tenancy agreement: None in the last 12 months (classed as made if paid within 28 days of the due date and evidence will be required)
  • CCJs:  None in the last 12 months
  • Defaults: None in the last 12 months
  • Unsecured borrowing: Highest arrear: 1 in the last 12 months, providing currently up to date
  • Bankruptcy, Individual Voluntary Arrangement (IVA) & Debt Management Plan: Considered from borrowers who have been party to a bankruptcy, Individual Voluntary Arrangement (IVA) or a Debt Management Plan will only be considered when satisfied or completed for over 3 years at a maximum of 60% Loan to Value (LTV)

Minimum credit score

  • 350
  • 375 where part or all of the loan is being used for debt consolidation (this includes any secured or unsecured credit being repaid)

We will consider cases that do not meet our minimum credit score requirements on a referral basis subject to the score not having been affected by credit impairing issues

Business credit profile (self- employed applicants)

No history of the following within the last 36 months (this extends to associated companies)

  • Receivership
  • Administration order
  • Winding up petition
  • Creditors or Compulsory Liquidation
  • Disqualified director

Minimum mortgage history

12 months

Where the applicants have been renting within the last 12 months, we can accept a rental reference from a reputable letting agent (private landlord are unacceptable) or a copy of the AST with supporting bank statements

 

Age

Customers must be a minimum of 21 years of age at the start of the mortgage and no older than 85 years of age at the end of the loan term

Customer type

Individuals (UK, EU and other foreign nationals residing in the UK, see ID section)

Maximum number of applicants

2

Power of attorney

Unacceptable

Non-owner occupiers
  • Any occupier aged 17 to 69 residing in the property and not party to the loan, will need to sign a Waiver Consent form
  • Any occupier who is co-habiting/partner or aged 70 and above and not party to the loan, will be required to sign an Occupier Deed of Consent form and have this completed and witnessed by a solicitor or a Licensed Conveyancer

The above is not a requirement in Scotland

Credit status
  • Mortgage arrears/BTL mortgage arrears / Secured Loan/Tenancy agreement: None in the last 12 months (classed as made if paid within 28 days of the due date and evidence will be required)
  • CCJs:  None in the last 12 months
  • Defaults: None in the last 12 months
  • Unsecured borrowing: Highest arrear: 1 in the last 12 months, providing currently up to date
  • Bankruptcy, Individual Voluntary Arrangement (IVA) & Debt Management Plan: Considered from borrowers who have been party to a bankruptcy, Individual Voluntary Arrangement (IVA) or a Debt Management Plan will only be considered when satisfied or completed for over 3 years at a maximum of 60% Loan to Value (LTV)

Minimum credit score

  • 350
  • 375 where part or all of the loan is being used for debt consolidation (this includes any secured or unsecured credit being repaid)

We will consider cases that do not meet our minimum credit score requirements on a referral basis subject to the score not having been affected by credit impairing issues

Business credit profile (self- employed applicants)

No history of the following within the last 36 months (this extends to associated companies)

  • Receivership
  • Administration order
  • Winding up petition
  • Creditors or Compulsory Liquidation
  • Disqualified director

Minimum mortgage history

12 months

Where the applicants have been renting within the last 12 months, we can accept a rental reference from a reputable letting agent (private landlord are unacceptable) or a copy of the AST with supporting bank statements

 

ID and Residency Status

Residential status

Applications are acceptable from UK and EU nationals residing in the UK

Other nationalities are considered subject to evidence of permanent rights to reside in the UK

Tiered visas are unacceptable

Proof of address and ID

Shawbrook uses an automated system for identity and address verification. If this fails, acceptable evidence will be required

Customer may be required to provide certified photographic and signature ID and proof of address

Independent legal advice

We will require the following to have independent legal advice:

  • Applicants aged 70 and over at the time of the application
  • Applicants who do not appear to be benefitting from the loan
  • Applicants whom we have concerns over their understanding of the application or its implications
  • Non-English-speaking applicants
  • People who are co-habiting and not party to the loan
  • Occupiers aged 70 and above and not party to the loan

 

Residential status

Applications are acceptable from UK and EU nationals residing in the UK

Other nationalities are considered subject to evidence of permanent rights to reside in the UK


Tiered visas are unacceptable

Proof of address and ID

Shawbrook uses an automated system for identity and address verification. If this fails, acceptable evidence will be required

Customer may be required to provide certified photographic and signature ID and proof of address

Independent legal advice

We will require the following to have independent legal advice:

  • Applicants aged 70 and over at the time of the application
  • Applicants who do not appear to be benefitting from the loan
  • Applicants whom we have concerns over their understanding of the application or its implications
  • Non-English-speaking applicants
  • People who are co-habiting and not party to the loan
  • Occupiers aged 70 and above and not party to the loan

 

Affordability

The following section confirms what type of income we will accept to verify affordability

 

Employed income

Minimum time in employment: 3 months

Employment must be permanent and not subject to any probationary period. (Evidence not within probationary period required, if time in employment is less than 6 months)
If employed via an agency, minimum time 12 months with the same agency is to be evidenced on payslips

For details of the documentation and assessment required for each acceptable source of income, please download the PDF version of our criteria guide.

Self-Employed income

Minimum time self-employed: 12 months

Applicants holding 25% or more of the issued share capital or is responsible for overall payment of their tax and national insurance will be classed as self-employed.
Where a Director’s salary is being drawn from a limited company, the profit must be sufficient to sustain the salary and we will need the latest company accounts to assess. We will not work off retained profits.
Where we have seen a director’s loan, details of the reason and how being repaid will be required

For details of the documentation and assessment required for each acceptable source of income, please download the PDF version of our criteria guide.

Other income
  • Pension income
  • Rental income
  • Child Benefit

For details of the documentation and assessment required for each acceptable source of income, please download the PDF version of our criteria guide.

Unacceptable income
  • Foster care income
  • CSA or maintenance payments
  • Seasonal, piece work and temporary employed applicants
  • Any benefit payments including Disability Living Allowance, Incapacity Benefit, Carers, Allowance, Working Tax Credit or Child Tax Credit
  • Contractor income
Expenditure

We use an automated expenditure model directly in our affordability assessment. However, certain types of miscellaneous expenditure not covered by the model. Therefore, all applicants must declare any other regular payments. The areas of miscellaneous expenditure are: Ground Rent/Service Charge, Maintenance/Child Support, School/University Fees and Childcare/Nursery Fees

 

Stress testing
5 Year fixed rate and/or 1st charge mortgage with 5 or more years remaining on the fixed rate - No stress is applied

  • Below 80% LTV - minimum £100 stressed affordability
  • 80% LTV and above - minimum £100 stressed affordability however, if stressed affordability is between £100 and £200, we will also require last 2 months’ bank statements


2 Year fixed and variable rates - stressed at 3%

  • 80% LTV and above - if stressed affordability is below £100, we will require last 2 months’ bank statements

Loan to income (LTI)

  • LTV: 0-85%  LTI: 6X
    Where pension income is the only source or is the majority of the income, the LTI will be restricted to 4.5x
Future changes to income and expenditure

If we are aware of changes to income during the term of the loan, we will require relevant information as to how the mortgage will remain affordable

Lending into retirement
If the loan term takes the applicant past the age of 70 or they declare an earlier retirement age, they must provide an explanation of how they will maintain the loan payments for the duration of the loan. At the time of application, if the applicant is within 10 years of their planned or standard retirement age of 70 (whichever is lower), we will require evidence of how they will maintain the loan payments for the duration of the loan

For details of the documentation and assessment required for each acceptable source of income, please download the PDF version of our criteria guide.

 

The following section confirms what type of income we will accept to verify affordability

 

Employed income

Minimum time in employment: 3 months

Employment must be permanent and not subject to any probationary period. (Evidence not within probationary period required, if time in employment is less than 6 months)
If employed via an agency, minimum time 12 months with the same agency is to be evidenced on payslips

For details of the documentation and assessment required for each acceptable source of income, please download the PDF version of our criteria guide.

Self-Employed income

Minimum time self-employed: 12 months

Applicants holding 25% or more of the issued share capital or is responsible for overall payment of their tax and national insurance will be classed as self-employed.
Where a Director’s salary is being drawn from a limited company, the profit must be sufficient to sustain the salary and we will need the latest company accounts to assess. We will not work off retained profits.
Where we have seen a director’s loan, details of the reason and how being repaid will be required

For details of the documentation and assessment required for each acceptable source of income, please download the PDF version of our criteria guide.

Other income
  • Pension income
  • Rental income
  • Child Benefit

For details of the documentation and assessment required for each acceptable source of income, please download the PDF version of our criteria guide.

Unacceptable income
  • Foster care income
  • CSA or maintenance payments
  • Seasonal, piece work and temporary employed applicants
  • Any benefit payments including Disability Living Allowance, Incapacity Benefit, Carers, Allowance, Working Tax Credit or Child Tax Credit
  • Contractor income
Expenditure

We use an automated expenditure model directly in our affordability assessment. However, certain types of miscellaneous expenditure not covered by the model. Therefore, all applicants must declare any other regular payments. The areas of miscellaneous expenditure are: Ground Rent/Service Charge, Maintenance/Child Support, School/University Fees and Childcare/Nursery Fees

 

Stress testing
5 Year fixed rate and/or 1st charge mortgage with 5 or more years remaining on the fixed rate - No stress is applied

  • Below 80% LTV - minimum £100 stressed affordability
  • 80% LTV and above - minimum £100 stressed affordability however, if stressed affordability is between £100 and £200, we will also require last 2 months’ bank statements


2 Year fixed and variable rates - stressed at 3%

  • 80% LTV and above - if stressed affordability is below £100, we will require last 2 months’ bank statements

Loan to income (LTI)

  • LTV: 0-85%  LTI: 6X
    Where pension income is the only source or is the majority of the income, the LTI will be restricted to 4.5x
Future changes to income and expenditure

If we are aware of changes to income during the term of the loan, we will require relevant information as to how the mortgage will remain affordable

Lending into retirement
If the loan term takes the applicant past the age of 70 or they declare an earlier retirement age, they must provide an explanation of how they will maintain the loan payments for the duration of the loan. At the time of application, if the applicant is within 10 years of their planned or standard retirement age of 70 (whichever is lower), we will require evidence of how they will maintain the loan payments for the duration of the loan

For details of the documentation and assessment required for each acceptable source of income, please download the PDF version of our criteria guide.

 

Security

The Property
  • The loan must be secured on residential owner-occupied property which is the applicant(s) primary residential address
  • The property must already have a first charge secured against it. Where there is an open or flexible mortgage, we will require confirmation of the highest credit limit
  • Where the first charge is interest only, confirmation of the repayment strategy will be required if the capital repayment becomes due during the term of the 2nd charge mortgage
  • If there has been a remortgage of the first charge dated within the last 6 months, we will require of a copy of the completion statement. If there has been any capital raised from the remortgage, we will require an explanation for the use of the funds. If the monies were used to consolidate debt accumulated from day to day living, we will be unable to proceed
  • The property must be of mortgageable condition prior to the issue of the Binding Mortgage Offer
Minimum property value

£70,000

Location

England, Wales and mainland Scotland (excluding the Channel Islands and Isle of Man)

Tenure
  • Freehold houses (Feuhold in Scotland)
  • Leasehold houses, flats and maisonettes (with no less than 50 years remaining on the lease at the end of the term)
  • Good leasehold
LTV by property type
  • Private leasehold flats or maisonettes to a maximum LTV of 75%. Standard LTV
    applies where the value of the property is equal to or greater than £200,000
  • Private leasehold flats in block with more than 5 storeys up to a maximum LTV of 75% subject to a minimum value of £150,000. Standard LTV applies where the value of the property is equal to or greater than £200,000
  • Private leasehold flats above commercial premises up to a maximum LTV of 65%, subject to the premises not being a restaurant or food outlet and a full internal valuation
  • Ex-council flats up to a maximum LTV of 60%, with a minimum value of £150,000 and a maximum net loan amount of £100,000 and subject to a full internal valuation. Ex-council flats in a block with more than 5 storeys are unacceptable
  • No LTV restriction on ex-council houses
Invasive & Damaging Plant Species
(Japanese/Bohemian Knotweed)
These can be considered on a case by case basis, subject to evidence of implementation of a professional treatment plan with an insurance backed guarantee
Property construction

Properties deemed as defective under the Housing Defects Act 1984 and Housing Act 1985 are unacceptable

The security must be of a standard construction with properties of non-standard construction only to be considered on a case by case basis and only when they are confirmed as mortgageable by the surveyor

Property in pre-emption Ex-council houses and flats still within their pre-emption period will be considered. The outstanding years remaining of the discount must be factored into the LTV calculation. The current year will be ignored for LTV purposes. A copy of the council documentation showing the pre-emption details must be supplied

 

The Property
  • The loan must be secured on residential owner-occupied property which is the applicant(s) primary residential address
  • The property must already have a first charge secured against it. Where there is an open or flexible mortgage, we will require confirmation of the highest credit limit
  • Where the first charge is interest only, confirmation of the repayment strategy will be required if the capital repayment becomes due during the term of the 2nd charge mortgage
  • If there has been a remortgage of the first charge dated within the last 6 months, we will require of a copy of the completion statement. If there has been any capital raised from the remortgage, we will require an explanation for the use of the funds. If the monies were used to consolidate debt accumulated from day to day living, we will be unable to proceed
  • The property must be of mortgageable condition prior to the issue of the Binding Mortgage Offer
Minimum property value

£70,000

Location

England, Wales and mainland Scotland (excluding the Channel Islands and Isle of Man)

Tenure
  • Freehold houses (Feuhold in Scotland)
  • Leasehold houses, flats and maisonettes (with no less than 50 years remaining on the lease at the end of the term)
  • Good leasehold
LTV by property type
  • Private leasehold flats or maisonettes to a maximum LTV of 75%. Standard LTV
    applies where the value of the property is equal to or greater than £200,000
  • Private leasehold flats in block with more than 5 storeys up to a maximum LTV of 75% subject to a minimum value of £150,000. Standard LTV applies where the value of the property is equal to or greater than £200,000
  • Private leasehold flats above commercial premises up to a maximum LTV of 65%, subject to the premises not being a restaurant or food outlet and a full internal valuation
  • Ex-council flats up to a maximum LTV of 60%, with a minimum value of £150,000 and a maximum net loan amount of £100,000 and subject to a full internal valuation. Ex-council flats in a block with more than 5 storeys are unacceptable
  • No LTV restriction on ex-council houses
Invasive & Damaging Plant Species
(Japanese/Bohemian Knotweed)
These can be considered on a case by case basis, subject to evidence of implementation of a professional treatment plan with an insurance backed guarantee
Property construction

Properties deemed as defective under the Housing Defects Act 1984 and Housing Act 1985 are unacceptable

The security must be of a standard construction with properties of non-standard construction only to be considered on a case by case basis and only when they are confirmed as mortgageable by the surveyor

Property in pre-emption Ex-council houses and flats still within their pre-emption period will be considered. The outstanding years remaining of the discount must be factored into the LTV calculation. The current year will be ignored for LTV purposes. A copy of the council documentation showing the pre-emption details must be supplied

 

Unacceptable Security

Unacceptable property types
(not an exhaustive list)
  • Commercial properties
  • Freehold flats and maisonettes
  • Flats over a restaurant/food outlet
  • Properties of 100% timber construction
  • Private leasehold flats in a block with more than 5 storeys valued less than £150,000
  • Ex-council flats in a block with more than 5 storeys
  • Steel framed construction unless the property is modern build with a traditional brick outer leaf
  • Park and mobile homes
  • Properties with agricultural restrictions
  • Leasehold properties with less than 50 years remaining at the end of the loan term
  • Properties with underpinning
  • Properties deemed defective under the Housing Defects Act 1984 and Housing Act 1985
  • Shared ownership or similar schemes
  • Properties with a flying freehold element greater than 25% of the gross floor area
  • Properties with possessory title
  • Grade 1/Grade A listed buildings
  • Properties currently for sale
  • Properties with solar panels installed where there is a lease in place for the roof space
  • Flats with any type of external cladding with combustible materials

 

Unacceptable property types
(not an exhaustive list)
  • Commercial properties
  • Freehold flats and maisonettes
  • Flats over a restaurant/food outlet
  • Properties of 100% timber construction
  • Private leasehold flats in a block with more than 5 storeys valued less than £150,000
  • Ex-council flats in a block with more than 5 storeys
  • Steel framed construction unless the property is modern build with a traditional brick outer leaf
  • Park and mobile homes
  • Properties with agricultural restrictions
  • Leasehold properties with less than 50 years remaining at the end of the loan term
  • Properties with underpinning
  • Properties deemed defective under the Housing Defects Act 1984 and Housing Act 1985
  • Shared ownership or similar schemes
  • Properties with a flying freehold element greater than 25% of the gross floor area
  • Properties with possessory title
  • Grade 1/Grade A listed buildings
  • Properties currently for sale
  • Properties with solar panels installed where there is a lease in place for the roof space
  • Flats with any type of external cladding with combustible materials

 

Valuations

Valuation instruction

An AVM, drive by or full internal valuation is required for each loan application (unless the case qualifies for a valuation bypass)

Valuation report validity 90 days from the date of the inspection
Valuation bypass Only acceptable where the property has been purchased within the last 12 months and the loan is for home improvement purposes. The purchase price can be used as the valuation figure for loans up to a maximum net loan of £100,000, up to 75% LTV
Drive by valuations Are available up to a maximum net loan amount of £300,000 up to 85% LTV (subject to the maximum LTV for the product)
AVMs by Hometrack

Automated valuations are acceptable in the following situations, subject to a minimum confidence score of 5

Properties in England and Wales

  • Up to 65% LTV - maximum net loan up to £300,000
  • Up to 80% LTV - maximum net loan up to £100,000
  • Up to 85% LTV - maximum net loan up to £50,000

Properties in mainland Scotland

  • Up to 65% LTV - maximum net loan up to £100,000
  • Up to 80% LTV - maximum net loan up to £50,000
  • Up to 85% LTV - maximum net loan up to £30,000
Valuation instruction

An AVM, drive by or full internal valuation is required for each loan application (unless the case qualifies for a valuation bypass)

Valuation report validity 90 days from the date of the inspection
Valuation bypass Only acceptable where the property has been purchased within the last 12 months and the loan is for home improvement purposes. The purchase price can be used as the valuation figure for loans up to a maximum net loan of £100,000, up to 75% LTV
Drive by valuations Are available up to a maximum net loan amount of £300,000 up to 85% LTV (subject to the maximum LTV for the product)
AVMs by Hometrack

Automated valuations are acceptable in the following situations, subject to a minimum confidence score of 5

Properties in England and Wales

  • Up to 65% LTV - maximum net loan up to £300,000
  • Up to 80% LTV - maximum net loan up to £100,000
  • Up to 85% LTV - maximum net loan up to £50,000

Properties in mainland Scotland

  • Up to 65% LTV - maximum net loan up to £100,000
  • Up to 80% LTV - maximum net loan up to £50,000
  • Up to 85% LTV - maximum net loan up to £30,000

COVID-19

Tax repayment loans

Where funds are to be used to repay current tax bills, applications will be considered on a case by case basis

Bounce Back Loan Scheme Where a loan has been taken, payments will be factored into the expenditure based on a 1% interest rate unless evidence provided that the loan has been repaid in full or payments visible on the business bank statements
Severely impacted industries Applications from the leisure, retail, hospitality & entertainment and travel industries will be reviewed on a case by case basis
Tax repayment loans

Where funds are to be used to repay current tax bills, applications will be considered on a case by case basis

Bounce Back Loan Scheme Where a loan has been taken, payments will be factored into the expenditure based on a 1% interest rate unless evidence provided that the loan has been repaid in full or payments visible on the business bank statements
Severely impacted industries Applications from the leisure, retail, hospitality & entertainment and travel industries will be reviewed on a case by case basis