Mortgage lending criteria

Bankruptcies/IVA/Debt Management

The Credit History question should be answered as ‘Yes' if any customer has had a Bankruptcy / IVA / Debt Management Arrangement / Debt Relief Order or made a formal or informal Arrangement/Order with a debt management provider/creditor to agree a revised payment less than the contractual monthly payment, which was:

Registered within the last 6yrs (whether now completed or not)

Or

Is still outstanding (whenever this was registered)

If a Bankruptcy / IVA / Debt Management Arrangement / Debt Relief Order or formal or informal Arrangement/Order with a debt management provider/creditor to agree a revised payment less than the contractual monthly payment was registered over 6yrs ago and is no long outstanding, the question can be answered as ‘No’.

Where a customer has agreed an arrangement within the terms of their contract (e.g. a payment holiday) this does not need to be declared.

CCJ

The Credit History question should be answered as ‘Yes' if any customer has had a County Court Judgement (CCJ) or default registered against them, or if self employed against their business, within the last 6 years. CCJs are generally taken into account in credit scoring however background details are required.

Mortgage Arrears

The Credit History question should be answered as ‘Yes' if any customer has been in arrears in the last 6 years with any borrowing or ever had a property repossessed. Applications where previous mortgages have been in arrears will be considered on an individual basis.

Simultaneous sale and purchase is the preferred route, but we recognise that this is not always possible.

Existing property is for sale but will not be sold before new mortgage completes - The existing mortgage payment must be keyed as a credit commitment and will be included in the affordability calculation.

Existing property to be rented out - The mortgage payment must be keyed as a credit commitment (the mortgage type for the commitment needs to by keyed as ‘Buy to Let'). The rent received should be keyed as 'Rental Income (if rental property)'.

Other Buy-to-Let mortgaged properties owned - The mortgages must be keyed as individual credit commitments and the total rent received keyed as 'Rental Income (if rental property).

A dependant is anyone who is financially reliant on your customer, who is not a party to the mortgage and does not contribute to the mortgage payments. A dependant may be a child, spouse not party to the mortgage, adult or elderly relative or a future dependant.

You need to capture separately both Child and Adult Dependants.

Child Dependant

A child dependant would include any children for which the customer(s) is the primary carer and who is under 18. A child dependant would include a future dependant where the customer is expecting a baby or is in the process of adopting a child. Foster children should be included as dependants.

Where any children have income and can fully support themselves they do not need to be keyed as a dependant.

If a child is not living with the customer(s) and maintenance is being paid, a dependant does not need to be keyed, but the maintenance amount must be keyed as a commitment.

Adult Dependant

An adult dependant is someone who is not party to the mortgage but is financially reliant on the customer. This could be a spouse/partner, elderly relative or grown up children who are unemployed or in full time education.

Where the adult dependant resides at the property for some of the time, you would key this in the adult dependant field.

Alternatively, where the customer financially supports an adult dependant who doesn't reside at the property, they would not be keyed as a dependant, but the related costs instead must be keyed as a total figure in “Other Commitments”.

All customers must make a minimum personal deposit for the property relevant to their individual credit score, product or scheme. No element of this deposit should be represented by a personal loan.

Where evidence of deposit is requested, the following documents are acceptable:

Gift from family

You should obtain a letter written by the family member that includes all of the following:

• Addressed to Halifax
• Dated within the last three months
• Name and address of the person(s) gifting the deposit
• Name and address of the applicant(s)
• The relationship between the person(s) making the gift and the applicant(s). They must be a family member. See definition of family member below
• The property address being purchased
• The amount of the deposit being gifted
• The source of the gifted deposit e.g. savings
• The gift is ‘not repayable' and the person(s) gifting the deposit 'will hold no interest in the property following completion of the mortgage'
• Signed by the person(s) gifting the deposit

A Gifted Deposit template letter (PDF, 39kB) is available for you to use in the Literature page.

You should also provide a UK bank statement or UK passbook from the family member or applicants showing the deposit funds in their account. Alternatively, the family member or applicant may provide a letter from their UK bank confirming that the funds are available. Additional statements may be requested where required.

If any of the deposit is gifted, this should be chosen as the source of deposit when keying the application.

The definition of a family member is someone who is related to at least one of the applicants:

• by birth/blood relative (for example an Aunty has to be via blood and not marriage)
• by marriage or civil partnership (including step children, adopted children and in-laws)
• as 'Common Law' partners or co-habitees.

Savings

You should obtain:

• The latest three months' UK bank statements or a UK passbook covering the latest three months' transactions showing the applicant's name, account details (sort code and account number for bank statements or account number for passbooks) and company name, or the latest annual statement for longer term savings plans
• The statements or passbook should be in the name of at least one of the applicants
• The latest closing balance must cover the total deposit required
• Any recent large or unusual deposit may require clarification to establish the source
• Where funds have originated from a Business account, you should obtain confirmation from the accountant that the withdrawal will not have a negative impact on the business.

Forces Help to Buy (previously called Long Service Advance of pay)

Serving members of HM Forces may be able to raise capital for a deposit by means of a 'Forces Help to Buy' (FHTB) interest free loan which will be repaid by the customer through their pay.

This can be accepted as a deposit for a mortgage on a main residence or when using the Help to Buy Equity Loan scheme and the repayment must be keyed as a commitment.

FHTBs are repayable interest free over 10 years so to calculate the monthly payment, divide the amount borrowed under the FHTB scheme by 120.

Where the deposit is funded from FHTB, the deposit type should be keyed as savings. The applicant will not receive confirmation of the FHTB amount from HM Forces until they have received their mortgage offer, so there is no requirement to obtain evidence.

Concessionary

If the deposit is from equity (e.g. a reduced purchase price) the application should be treated as a concessionary purchase - refer to CONCESSIONARY PURCHASE FOR CRITERIA.

Vendor Deposits and Cashbacks (Non New Build Properties)

Vendor Gifted Deposits are an unacceptable source of deposit for any non new build property.

This does not impact buyers who are receiving gifted deposits to purchase New Build Properties or concessionary purchases.

We do not currently accept new business applications from ExPat residents.

Applications involving finder's fees are not acceptable.

A finder's fee is a fee or commission paid by a seller to a third party (such as an investment club) for finding or introducing a buyer. It does not include the normal fee or commission payable to any estate agent handling the sale.

The first monthly payment is always collected in the month following completion, for example if a mortgage completes in June the first payment will be collected in July. This will be collected on the customer’s chosen monthly payment date unless completion occurs in the last few days of any month and results in less than 4 working days between the completion date and the customer's chosen payment date (excluding those days), the first payment will then be collected on the 10th of that month. This date will then revert to the customer's chosen payment date on the following month.

The first monthly payment includes an amount of ‘Initial Interest’ from the day of completion to the end of that month plus the first monthly mortgage payment. For example:

• If completion occurs on the 15th, interest is calculated from the 15th to the end of the month and then added to the first payment
• If completion occurs on the 5th, interest is calculated from the 5th to the end of the month and then added to the first payment

The 'Amount of each instalment' section of the mortgage illustration sets out a first payment assuming a mortgage completes on the 1st of the following month. A customer’s first monthly payment may be different as it will depend on when the loan starts. We write to all customers when the mortgage starts to tell them when we will collect their first and subsequent payments.

The maximum loan amount available on interest only is 75% loan to value (LTV) (or for sale of mortgaged property (SOMP) main residence 50%, 60% or 75% depending on the minimum equity requirement). On part interest only/part capital and interest repayment customers can borrow up to 85% LTV with the balance on capital and interest repayment.

All loans arranged where the capital element is not included in the monthly payment, including those that are part capital and interest repayment, part interest only, must have a plan in place to repay the capital at the end of the term. This includes new loans, further advances and product transfers.

As a responsible lender, it is important for us to see evidence of the repayment plan for interest only mortgages so documents relating to the repayment plan must be received before a new mortgage offer can be considered.

The repayment plan must cover the whole amount of interest only. This information is only a guide. A mortgage offer will only be issued once we have confirmed that the evidence supplied meets our criteria.

Bonus

There is a minimum income requirement for this repayment plan to be available:

• Sole applicant with an income of £75,000 or more
• Joint applicants where one applicant has an income of £75,000 or more, or where the combined income of both applicants is £100,000 or more. e.g. this could be £60k and £40k, therefore no applicant has an income of £75,000 or more but together their income is £100,000 or more
• The income requirement is calculated on the total of Basic, Overtime, Bonus and Commission for employed applicants or the latest year's income for self-employed customers.

The amount of this repayment vehicle which can be used is assessed by:

• An annual bonus figure is calculated from the payslips provided as evidence
• Where bonus is paid annually the average of the bonus received in the last 2 years is used
• 30% of this bonus figure is then multiplied by the term of the mortgage required for the amount of Interest Only lending available
• There is an expectation that the customer will make periodic lump sum repayments to reduce the amount outstanding during their Interest Only mortgage and it is important the customer understands this, however Early Repayment Charges would apply as normal where any overpayment concession is exceeded
• Where any Bonus is to be used as a repayment plan no bonus income earned by any customer will be used in the affordability assessment
• Lending Into Retirement - the term of any Interest Only lending must not exceed the lower of the Anticipated Retirement Age or Maximum Working Age of 70 where Bonus is being used as a Repayment Plan. The term can run up to 364 days past the lower of the ARA / MWA of 70.

Evidence of bonus income is required:

• If received monthly the latest 3 payslips. If received quarterly, the latest 4 bonus payslips
• If received half yearly then previous 2 payslips showing bonus payment
• If received annually then previous 2 years payslips showing bonus payment
• An average value should be calculated and used
• Bonus slip must show applicant & employer name, pay date and gross bonus amount.

Cash

There is a minimum income requirement for this repayment plan to be available:

• Sole applicant with an income of £75,000 or more
• Joint applicants where one applicant has an income of £75,000 or more, or where the combined income of both applicants is £100,000 or more. e.g. this could be £60k and £40k, therefore no applicant has an income of £75,000 or more but together their income is £100,000 or more
• The income requirement is calculated on the total of Basic, Overtime, Bonus and Commission for employed applicants or the latest year's income for self-employed customers.

The amount of this repayment vehicle which can be used is assessed by:

• Copy of statement dated within last month and a previous statement showing Cash amount held for a minimum of 3 consecutive months
• If a minimum £50,000 has been held in a savings or current account (£ sterling) for a minimum 3 consecutive months 100% of the current cash balance can be used to support Interest Only lending
• If the statements show a fluctuating cash balance then the lowest balance will be used
• If savings are also being used as source of deposit then evidence of an amount sufficient for both the repayment plan and deposit must be provided
• Lending Into Retirement – the term of any Interest Only lending must not exceed the Maximum Working Age of 70 where Cash is being used as a Repayment Plan.

Endowment

There is a minimum income requirement for this repayment plan to be available:

• Sole or joint applicants have a combined income of £50,000 or more
• The income requirement is calculated on the total of Basic, Overtime, Bonus and Commission for employed applicants or the latest year's income for self-employed customers.

The amount of this repayment vehicle which can be used is assessed by:

• Copy of latest projection statement dated within last 12 months
• Endowment companies will present three growth rates to a customer with the middle one (for example 6%) being the most likely projected outcome. We allow up to 100% of projected amount using the middle % figure.

Pension

There is a minimum income requirement for this repayment plan to be available:

• Sole or joint applicants have a combined income of £50,000 or more
• The income requirement is calculated on the total of Basic, Overtime, Bonus and Commission for employed applicants or the latest year's income for self-employed customers.

The amount of this repayment vehicle which can be used is assessed by:

• Copy of latest pension statement dated within the last 12 months
• The pension must have a minimum projected total fund value of £400,000 of which a maximum 15% of this amount will be used to support Interest Only lending
• Where a projected total fund value does not show on the pension statement e.g. on a final salary pension if the projected lump sum is at least £100,000 up to 60% of a projected lump sum value can be used
• Where a statement gives a range of projected values the middle of three figures or the lower of two would be used
• Pensions belonging to the same person can be combined to reach the £400,000 or £100,000 levels but pensions held by joint applicants cannot be combined to meet these levels
• Pension contributions should be collected under ‘Total monthly payment towards Investment Vehicles' and will be used within affordability calculations
• It is important the customer understands the need to maintain the pension contributions
• Lending Into Retirement - the term of any Interest Only lending must not exceed the lower of the Anticipated Retirement Age or Maximum Working Age of 70 where Pension is being used as a Repayment Plan. The term can run up to 364 days past the lower of the ARA / MWA of 70.

Sale of mortgaged property

There is a minimum income requirement for this repayment plan to be available:

• Sole applicant with an income of £75,000 or more
• Joint applicants where one applicant has an income of £75,000 or more, or where the combined income of both applicants is £100,000 or more. e.g. this could be £60k and £40k, therefore no applicant has an income of £75,000 or more but together their income is £100,000 or more
• The income requirement is calculated on the total of Basic, Overtime, Bonus and Commission for employed applicants or the latest year's income for self-employed customers

There is a minimum credit score requirement for this repayment plan to be available. If applications do not meet this an alternative repayment plan would need to be selected.

The amount of this repayment vehicle which can be used is assessed by:

• The equity amount available in the property being mortgaged can be used to support Interest Only lending
• This will be calculated using the valuation/property assessment carried out as part of the application and any existing or new additional borrowing elsewhere to be secured against the property must be declared and will reduce the equity amount available
• If the property is to be a main residence there must be a minimum equity amount available. The equity amount is calculated as the property value minus interest only amount:
• Up to 50% interest only the minimum equity requirement will be £300,000
• For >50%-60% the minimum equity will be £500,000
• For >60%-75% the minimum equity will be £750,000
• For part Interest Only / part capital and interest repayment lending the minimum equity will be calculated at the end of the mortgage term, not at point of application.
• The maximum Loan To Value (LTV) on Interest Only is 75%; part interest only / part capital and interest repayment is available with the balance above the SOMP interest only amount, up to a maximum 85% LTV, on a capital and interest repayment basis.
• The term on any Capital & Interest Repayment element cannot exceed the term on Interest Only
• If the property is on the ‘second home' scheme the minimum equity requirement does not apply and a maximum LTV of 75% can be on Interest Only
• It is important the customer understands the requirement to sell their property at the end of the term to repay the Interest Only loan amount
• Lending Into Retirement – the term of any Interest Only lending must not exceed the Maximum Working Age of 70 where Sale of Mortgage Property is being used as a Repayment Plan (except where property is ‘second home' where a longer term may be considered).

Sale of other residential property

There is a minimum income requirement for this repayment plan to be available:

• Sole or joint applicants have a combined income of £50,000 or more
• The income requirement is calculated on the total of Basic, Overtime, Bonus and Commission for employed applicants or the latest year's income for self-employed customers.

The amount of this repayment vehicle which can be used is assessed by:

• Due to valuation and verification requirements this is restricted to properties within the UK
• Completed interest only - other residential property form and, if the mortgage lender is outside Lloyds Banking Group, a copy of the latest mortgage statement dated within last 12 months
• We will check the ownership of the other residential property and assess its value using an automated valuation (AVM). (Ownership of the other residential property must be in the same name as the applicants)
• We will compare the equity available in the property with the amount of interest only lending required
• Current equity within the property must be over £50,000
• We will use 80% of the current equity value of the property to support interest only lending
• If the valuation fails to sufficiently value the other property the customer could obtain a full valuation of the property (at their own cost) using a RICS certified surveyor
• Please note that there is a minimum greater than £50,000 equity requirement for each individual property being used to support Interest Only lending
• If the property is not already purchased, evidence required will also include; property details, Acting Solicitor to confirm intended ownership of the second property, details of any loans to be secured against this property (property valuation and land registry search carried out by us if needed). We will confirm the intended ownership of the second property prior to offer on the new mortgage / further advance.

Stocks and Shares (including ISA) and other investments

There is a minimum income requirement for this repayment plan to be available:

• Sole or joint applicants have a combined income of £50,000 or more
• The income requirement is calculated on the total of Basic, Overtime, Bonus and Commission for employed applicants or the latest year's income for self-employed customers.

The amount of this repayment vehicle which can be used is assessed by:

• Only UK based investments quoted within the FTSE index held in sterling are acceptable
• Unit trusts / Open Ended Investment Companies / Investment Bonds (UK) allowed
• Copy of share certificates, nominee account statement or confirmation from a recognised stock broker containing evidence of share holdings together with their valuation
• Copy of latest ISA statement dated within last 12 months
• The amount of interest only cover available will be 80% of the current value of the investment which must be greater than £50,000
• The total can be made up of a combination of Stocks and Shares ISA, Unit Trusts, Investment Bonds and Stocks and Shares.

Important points on the assessment:

• We are not providing advice on your customer's repayment plan(s) or making any guarantee that their plan(s) will be sufficient to repay the outstanding balance (capital) at the end of the mortgage term.
• Your customer should review their plan(s) regularly during the term of their mortgage to make sure it is on track to repay the outstanding balance.
• Periodically, we will ask your customer to provide evidence of their repayment plan(s). If your customer is unable to satisfy us that their repayment plan(s) remains on track to repay the outstanding balance on their mortgage, we may ask your customer to transfer some or all of their mortgage onto a capital and interest repayment basis.
• Please remember it is your customer's responsibility to ensure they have sufficient funds to repay their outstanding balance at the end of the mortgage term. If they are unable to do so, their home may be repossessed to repay the outstanding balance.

Important points on repayment plans:

• Repayment plans CANNOT be accepted if they include the name of anyone NOT named on the mortgage.
• Your customer can use more than one repayment plan to cover their total interest only amount. In this case, please send the relevant evidence for all repayment plans.
• The following are NOT acceptable repayment plans:
• Sale of other commercial property.
• Sale of non property assets.
• Inheritance.
• Maturity dates will be requested for each applicable repayment plan
• The mortgage term must finish before a maximum age of 70 years rather than 80 years for repayment mortgages. For pension and bonus repayment plan types the maximum term would be restricted further if there was a lower anticipated retirement age.

Only repayment vehicles for those customers intending to live at the mortgaged property may be used to support the loan. E.G. if a parent is named on the mortgage to help with affordability then a property in the parents name cannot be accepted as a repayment vehicle.

Existing Halifax mortgage customers moving home

If an existing customer does not meet the current interest only rules we may consider allowing interest only on the new mortgage up to the level held currently, provided the mortgage term is not increasing. Please refer to your BDM for guidance.

The maximum age at the end of the mortgage term is 80 years for all lending.

Future retirement income will need to be verified where the customer is taking a mortgage term which extends beyond the earlier of their anticipated retirement age or a maximum working age, for which we will use 70 or 75. Affordability will be assessed on the future retirement income. On occasions, a further review will be required to confirm we feel it is appropriate for the customer to lend into retirement.

The applicant's plans should be discussed in view of their occupation, and reasonability of working beyond state pension age should be documented where appropriate. 

We will require a ‘Customer Working Age form’ (PDF, 3.14MB) to be completed by all customers on an application where the mortgage term passes a working age of 70 for any customer. This form asks the customer(s) to confirm they have considered the implications of the term chosen and that they believe they can continue to work until the age indicated. The completed form will be required before we can proceed to offer.  Please see also Maximum Working Age.

The types of evidence which can be used to verify anticipated retirement income are as follows:

• Private / Company Pension Forecast Statement dated within the last 18 months
• State Pension Statement dated within last 18 months which must be obtained by the customer directly as an actual statement with their name and address on it (this can be obtained from The Pension Service).
• State Pension Forecast statement issued to the customer directly from The Pension Service with their name and address on it.
• Annuity Statement dated within the last 18 months

The types of evidence which can be used to verify Pension Income already being received are as follows:

For State Pension, War Pension and Widows Pension

• Latest 1 month bank statement

For Company or Private Pension

• One of the following:
• Latest month’s payslip(s)
• Latest bank statement
• Latest pension statement dated within last 12 months

See below for variations to the limits set within this table

• The maximum loan amount available on an interest only basis is 75% LTV (or for sale of mortgaged property (SOMP) main residence 50%, 60% or 75% depending on the minimum equity requirement). On part interest only/part capital and interest repayment customers can borrow up to 85% LTV with the balance on capital and interest repayment.
  
  See our Interest only section for more information.
• For house purchase and remortgage where the total LTV is over 85% all borrowing must be on a repayment basis.
• The maximum loan for standard new build houses/bungalows is 95% and for flats 85%.
• The maximum loan on converted or refurbished properties where the vendor is a builder/developer and the property has been vacated to allow the refurbishment to be undertaken is 80%.
• The maximum loan on remortgages without additional borrowing is 90%.
• The maximum loan on remortgages with additional borrowing is 85%.
• The maximum Loan to Value loan on remortgages of Mortgage Free (Unencumbered) properties is 85%.
• Customer taking out a loan above 75% at application stage cannot transfer from repayment to interest only, within the first 12 months of completion of the mortgage.
• Further advance applications are subject to a limit of 85% LTV.
• Further advance applications will not be permitted within 6 months of completion of the original mortgage.
• Further advance is subject to a minimum loan of £10,000.
• Within these lending limits we calculate the loan available using a comprehensive affordability assessment. There are also Loan to Income (LTI) caps that will apply and may impact the maximum loan. See Affordability, LTI & Income Multiples for further details

• No more than two lodgers are acceptable providing that they are treated as a family member, i.e. sharing living accommodation
• We do not lend using any income provided by lodger(s)
• If a lodger(s) have exclusive occupation of a self-contained part of the house (e.g. an annex) or your customer does not intend to occupy the property on a permanent basis, this will require further checks as the lodger(s) may acquire legal rights

40 years at time of application

• Minimum age 18 years.
• Maximum retirement, unless retirement income meets affordability rules.
• Please see also Maximum Working Age
• The maximum age at the end of the mortgage term is 80 years for all repayment mortgages and 70 if any part of the mortgage is on an interest only basis.

Permanent right to reside is required for all applicants on all applications which do not meet the following criteria:

• The customer (or either customer on a joint application) has lived in the UK for more than 5 years OR
• Loan to Value (LTV) is <=75% OR
• Sole applicant with an income of £75,000 or more. Joint applicants where one applicant has an income of £75,000 or more, or where the combined income of both applicants is £100,000 or more (e.g. this could be £60k and £40k, therefore no applicant has an income of £75,000 or more but together their income is £100,000 or more)

If any of the criteria above are met the application can proceed without proof of permanent right to reside being required for any applicants.

However if a next step message advises 'Proof of permanent right to reside in the UK is required for (applicant name)' this must be provided for all customers on the application. If this is not available when requested that applicant would have to be removed from the application, or the loan to value reduced to 75% LTV to proceed.

Permanent right to reside can include:

• As part of the EU Settlement Scheme EEA, EU and Swiss citizens, living in the UK by 31 December 2020 can apply to continue to live in the UK after 30 June 2021 and will receive one of two statuses which are both acceptable:
• Settled status (awarded where they have lived in UK for at least 5 years and also known as 'indefinite leave to remain under the EU Settlement Scheme').
• Pre-settled status (awarded where lived in the UK for less than 5 years and they can re apply for settled status after 5 years continuous residence in UK has been reached).
• Indefinite leave to enter or remain.
• Republic of Ireland citizens do not need to apply under the EU Settlement Scheme and have automatic permanent right to reside in the UK (no proof of permanent right to reside is required for ROI citizens).

Proof of permanent right to reside could be verified to one of the following:

• For EEA nationals an immigration status 'share code' - customers who can view their immigration status online at gov.uk can provide a share code which lasts for 30 days and we can use to view their immigration status e.g. settled or pre-settled status.
• Please note only ‘immigration status’ share codes starting with an ‘S’ are acceptable and not ‘right to work’ or ‘right to rent’ share codes
• Indefinite leave stamp in passport including: Indefinite Right (or Leave) to Remain/Enter; Right of Abode; 'There is at present no time limit on the holder's stay in the United Kingdom'
• Biometric Residence Permit showing 'indefinite' rights to remain (this includes 'indefinite leave to remain', 'indefinite leave to enter' or 'no time limit')
• Letter from the Home Office confirming indefinite right to remain in the UK

To determine if a customer has lived in the UK for more than 5 years we will use data provided by the credit reference agencies. In some instances we may require proof of residence in the UK for over 5 years.

To calculate the income of £75,000 or £100,000 we will include the total of all earned incomes or the latest year’s income for self employed customers.

On Shared Equity and Shared Ownership schemes, to determine if the <=75% loan to value (LTV) criteria has been met, the percentage LTV is calculated as the loan amount against the value of the customer's equity share. (On Shared Equity applications this differs to the LTV used for selecting from the product range which is the loan amount against the total purchase price).

Applications from non-UK nationals holding diplomatic immunity are not acceptable.

• Maximum of four applicants
• Two incomes are taken into account for affordability.
• For Bonus/Cash/Sale Of Mortgage Property repayment plans, only the income from the first two applicants will be used to determine the income qualifying criteria.

Sub-sales and back-to-back transactions are not acceptable.

A sub-sale occurs when a property is bought and then sold on within six months, i.e. the borrower is buying the property from someone who has themselves bought the property less than six months before. The date of registration at the Land Registry is how we determine the length of ownership.

This means that the current vendor must have owned the property for at least six months before we can accept an application to purchase that property.

A back-to-back transaction is a type of sub-sale where the intervening seller buys from the original seller and sells on to the borrower on the same day or within a few days. We also regard as sub-sales, cases where the seller acquires the freehold (or superior leasehold) title to the property, which they then immediately sell on to the borrower by the grant to them of a lease (or sub-lease).

The following cases are exceptions where it is acceptable for the property to be sold on within six months of acquisition by the seller.

Where sales are by:

• A personal representative of the registered proprietor; or
• An institutional mortgagee exercising its power of sale; or
• A receiver, trustee-in-bankruptcy or liquidator; or
• A developer or builder selling a property acquired under a part-exchange scheme.
• A registered Housing Provider (Housing Association) exercising a power of sale.

We will also accept inherited properties where the applicant is a beneficiary but has not owned the property for 6 months. Applications where the applicant is not a beneficiary of the inherited property and the beneficiary has owned the property for less than 6 months are not acceptable and must be declined. The conveyancer will be responsible for ensuring the application meets the acceptable criteria.

Applications which involve assignable contracts or irrevocable powers of attorney in favour of intervening sellers are not acceptable. Any other structure to the transaction which has a similar effect should be reported to us.

Halifax use affordability as a way of assessing how much they will lend. Where the loan requested is above the maximum loan available from our affordability calculation the loan amount should be reduced to proceed or the application will be declined. Please refer to our affordability calculator.

PLEASE NOTE: The affordability calculator will give a guide to the amount we would be willing to lend however, as no credit search is carried out please be aware that this amount is subject to change once the Decision in Principle (DIP) is keyed.

When calculating affordability, the following Loan to Income (LTI) caps also apply. These can be used to calculate the maximum loan that would be available based on income but these are caps and the actual maximum loan could be lower and can be impacted by loan to value and credit score.

First time buyer Boost

First time buyer Boost LTI eligibility

• Purchase applications only.
• Any applicant is a first-time buyer (could be one applicant on a joint application, key FTB as first applicant).
• Total income on application is £50,000 or more.
• Loan to value (LTV) is 90% or less.
• Not available on shared equity or shared ownership schemes.
• For applications with any element of self-employed income please refer to the standard LTI table.
• For a small number of applications the overall credit profile may restrict the LTI applied to 5.00x rather than 5.50x shown, or the level of credit score may mean standard LTIs will apply.

Please note:

• If the loan is for an Affordable Housing scheme (Shared Equity or Shared Ownership) then a scheme max LTI of 4.49x would apply.
• If there is any element of self-employed income on an application and the application income is  up to £75k, a maximum LTI of 4.49x will apply. For loans where the application income >£75k, and there is any element of self employed income, the normal 5.50x maximum LTI applies up to 75% LTV. For loans >£500,000 to £750,000 of 85.01% to 95% LTV and for loans >£750,000 to £1m of 75.01% to 85% LTV a 4.00x LTI will apply.
• For like for like remortgage customers with no additional borrowing, who receive employed income only, up to 75% loan to value (LTV) and subject to credit score a 5.50x LTI will apply where the standard LTI would normally be below this level. A maximum LTI of 4.49x will still apply for remortgages on an Affordable Housing scheme (Shared Equity or Shared Ownership).
• The level of credit score achieved and overall credit profile may restrict the LTI applied; this may be restricted to 4.49x, to 5.00x rather than 5.50x shown and if income >£75k and loan >£500k where 4.49x shows this may be restricted to 4.00x.
• A different maximum LTI may sometimes apply as a result of the particular product selected.

A property’s Energy Performance Certificate (EPC) rating is used in our affordability calculations allowing us to reflect a more tailored view of energy costs. A customer whose property has a higher EPC rating (e.g. A/B) will generally have lower energy costs than those with a lower EPC rating (F/G) on like-for-like use.

For properties with an A/B EPC rating you may see a small increase in the maximum loan amount available and for properties with an F/G EPC rating a small decrease. There is no change to the maximum loan available for properties with a C, D or E EPC rating or where the EPC is unknown.

For some customers we may make a deduction within our affordability calculation to allow for financial planning commitments the customer may have going forward.

Within our affordability calculation we may apply an affordability adjustment for some contractors to take into account likely business expenses.

In some circumstances we may deduct credit commitments as ongoing in our affordability calculation even when customers have declared an intention to repay these. If the maximum loan available is reduced as a result then the loan amount must be reduced to proceed.

When calculating affordability on interest only loans, Halifax will take into account the monthly premiums payable for the relevant repayment vehicle i.e. existing endowment or new or existing ISA. Please ensure the premium(s) is specified at both DIP and full application.

Affordability must also include future changes to income and expenditure.

Where the maximum loan available is below that requested there may be the option to extend the term (up to retirement) or extend term into retirement (subject to evidence of adequate retirement income).

Please note, if the maximum loan available is reduced due to income not being evidenced at the declared level then the loan amount must be reduced accordingly.

Only in the below scenarios may we consider a loan amount above the maximum loan from our affordability model:

• Existing Halifax mortgage customers with no increase in in loan amount or loan to value (LTV) compared with their current mortgage (see Existing Customers).
• There is additional income, not previously considered, that is expected for the life of the mortgage and can be evidenced in line with our requirements.

For Mortgage Prisoners criteria, please refer to our Mortgage Prisoners section.

Where a customer's income comes from a contract and they are not employed on a permanent basis they are classed as a contractor. This will include individuals who are self-employed and pay their own tax, those who are employed via an umbrella company who deduct their tax and people who are essentially employed but on a fixed/short term contract e.g. 12 months.

Contractors can be treated as self-employed or employed for income verification purposes:

Self Employed

Treat as Self Employed if:

• The customer pays their own tax, OR
• Has more than 1 contract, OR
• Has set up a limited company and employs other contractors.

Income is confirmed as standard for self-employed customers.

Employed

Treat as Employed if:

• Tax is paid by the company they work for (or they are employed via an umbrella company who deduct tax) OR
• Contractors who earn more than £500 per day or £75k per annum, OR are an IT contractor on any income, can be treated as employed irrespective if the customer pays their own tax, or classes themselves as self-employed. (The only exception to this is where a customer has more than one contract or they have set up a limited company and employs other contractors, in which case they should be treated as self-employed).

Additionally to be treated as employed the customer must have either:

• 12 months or more continuous employment, with 6 months of the contract remaining, or
• 2 years continuous service (for the last 2 years as at the date of application) in the same type of employment

When we are treating a contractor as employed for income verification these are our requirements:

Contractor who pays own tax, or it is deducted by umbrella company (including IR35)

• Copy of latest contract and latest month’s payslip(s) required (or where payslips not issued latest month’s bank statement).
• Income to be used is the lower of the gross value of the contract or income calculated from payslip(s)/bank statement.
• Gross value of contract is calculated as daily rate on the contract x 5 days per week x 46 weeks per year (or hourly rate x 7 hours per day x 5 days per week x 46 weeks per year). Unless the contract states the actual hours/days worked are lower in which case use these figures.
• Income from payslip(s)/bank statement is calculated by multiplying the gross pay received to give an annual figure and then calculating the income based on a 46 week year (unless the contract states the actual weeks to be worked is lower in which case use these figures) e.g. multiply gross pay on a monthly payslip x 12, divide by 52 weeks and multiply by 46 (or average the gross pay on the weekly payslips and x 46).
• The total gross pay showing on umbrella payslips may be broken down by basic salary, commission, ‘additional taxable income', holiday pay etc. but as long as the contract confirms the contractor is paid via a daily rate, or hourly rate, the income does not need to be split into these separate elements and can all be keyed as basic salary.
• The lower of the two figures calculated is keyed as income and used for affordability.
• For customers who have set up a Limited Company or a Limited Liability Partnership (LLP) the income evidence must be from the actual contracted employer not their own Limited Company.
• Contractors who are set up as a Limited Company may not be entitled to the full income of the contract where there is more than one shareholder. If there are other shareholders, and they are also to be named on the mortgage the income from the contract must be keyed for one customer only and no income from this contract can be keyed for the other applicants that are shareholders. If there are other shareholders, but they are not to be named on the mortgage the income should be keyed to reflect the customer share e.g. if 50% share then 50% of income should be used.

Fixed/Short Term or Agency; tax is deducted by employer (not including IR35)

• The latest month’s payslip(s) must be used to evidence income, or latest 3 months’ payslips where other income is being used.
• Income from payslip is calculated by multiplying the gross pay received to give an annual figure and then calculating the income based on a 46 week year e.g. multiply gross pay on a monthly payslip x 12, divide by 52 weeks and multiply by 46 (or average the gross pay on the weekly payslips and x 46).

Construction Industry Scheme Contractors (CIS)

Applications from customers employed on a Construction Industry Scheme (CIS) Contract will be considered. Income should be evidenced using the latest 3 months consecutive payslips/invoices/statement along with corresponding bank statements (this could be from the same or different contracts).

For example, if income in January, February and March is used, payslips/invoices/statement and corresponding bank statements must be for January, February and March. An average of the latest 3 months income should be used. This average amount should then be calculated based on a 46 week year e.g. multiply the average monthly pay x 12, divide by 52 weeks and multiply by 46.

If no income is received or the customer is unable to provide both pieces of evidence of income, then ‘zero' income must be used for that month.

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

Zero hours contracts

Applications from customers employed on a zero hours contract for over 12 months will be considered. Proof of all income in the last 12 months is required and that total income figure will be used.

Probation

Income from probationary employment is only used where the probationary period is part of a permanent contract. If the contract is purely probationary with the employer having the option to terminate the contract then this income cannot be used.

It is important that probationary contracts are keyed accurately as follows:

Where the applicant receives an offer of permanent employment and the contract states an initial probationary period e.g. three or six months, it should be keyed as 'permanent'. The income will be used in the affordability assessment.

Where the applicant is offered a probationary contract, e.g. for three months, at the end of which the employer has the option to determine if a permanent contract will be offered, it should be keyed as ‘probationary'. The income will not be used in the affordability assessment.

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.

We will accept income in the following five non-sterling currencies: US Dollar, Euro, Australian Dollar, Indian Rupee and Swiss Franc.

The income types we’ll accept in non-sterling are employed basic salary, bonus, overtime and commission. Non-Sterling income cannot be accepted for ‘other income’ types.

We can include sterling income and non-sterling income on the same application, but we can only use one non-sterling currency on an application.

Key a Decision in Principle (DIP) to check affordability for an application with non-sterling income. On our income screens you’ll see a new currency dropdown field and should key in the amount in the originating non-sterling currency, not the equivalent GBP amount. We’ll convert the income amount to GBP and apply a haircut of 20% (10% for bonus income) to cover any potential currency fluctuations.

For income verification if payslips show the amount in the originating currency that is sufficient, but if they only show the converted GBP figure you should upload a compensation letter/remuneration statement in addition to the payslip(s). This document should show the income amount in the original currency which is what we will require.

The compensation letter/remuneration statement can be a document that was sent directly to the customer by their employer, or received online but should show:

• Employer name
• Employee name (to match the application and payslip)
• Pay date
• Non-sterling currency using
• Income type e.g. salary or bonus clearly denoted.

Payslips and any other documents must be in English language.

When non-sterling income is used two additional paragraphs will show on the Mortgage Illustration in the ‘Main features of loan’ and ‘Amount of each instalment’ sections. A new letter will be sent to the customer after completion if the exchange rate goes down by more than 20% to advise them and confirm the support available if required.

Non-sterling income is only accepted on purchase and remortgage applications. Non-sterling income is any income other than sterling received by a customer ; non-sterling income converted to GBP to be paid into a UK bank account is still considered to be  non-sterling income. Channel Islands/Crown Dependencies i.e. Jersey, Guernsey and Isle of Man plus Gibraltar and Falkland Islands should be treated as GBP and not non-sterling. Please note the amount of any ‘haircuts’ are subject to change. All mortgage applicants must be UK residents.

•  Payslips must show the applicant and employer name, pay date, basic income, gross & net pay and any additional payments being used in affordability
•  We will require contact details for the employer so we can request the reference directly from them and this must be returned directly to us.
•  We will provide a form the employer can complete and return with their company headed paper, or they can provide a response in their own format as long as all the requested information is included: employer name and address; the employee’s name; employee's start date, contract status and income details (basic salary and any other income elements). The reference must be addressed to the Halifax and quote our reference number. The reference must be signed and dated, and the name and position of the person completing the reference must be provided. Any alterations must be clearly marked and initialled.
•  For incomes received less frequently than monthly i.e. Yearly/Half Yearly/Quarterly e.g. bonus or commission, please key the lower of (a) the total income earned in the last 12 months or (b) the average of the income earned in each of the last 2 years. The income should have been received for 2 years with the same employer, otherwise the average figure would be calculated using zero for the previous year. All payslips showing this income for the latest 2 years are required.
•  For incomes received less frequently than monthly i.e. Yearly/Half Yearly/Quarterly e.g. bonus or commission, please key the lower of (a) the total income earned in the last 12 months or (b) the average of the income earned in each of the last 2 years. All payslips showing this income for the latest 2 years are required.
•  Hand written payslips are acceptable, but only where the corresponding bank statements are also provided to confirm the income paid by the employer
•  Bank statements must show the customer's full name or initial and surname and account number
•  Internet bank statements must show bank heading/name and http address
•  Benefit Award Letters must be dated within last 12 months and show the applicant name and monetary value of the allowance. The benefit must not be received on behalf of another person, e.g. a dependant.

We will use earned income up to the lower of the declared ‘Anticipated Retirement Age’ or a maximum working age of 75.

The maximum working age applied will be 70 for:

• Remortgage applications with any capital raising/additional borrowing
• Applications with any amount on interest only
• Some purchase and remortgage applications because of the level of credit score achieved and overall credit profile.

If a term past 70 years of age is selected for an application restricted to a maximum working age of 70 a Corrective Action message will fire a Decision in Principle (DIP): ‘As the maximum working age on this application is 70 the term chosen extends into retirement, anticipated retirement income must be keyed or the term reduced to a maximum of … (years)’.

The maximum working age applied will be 75 on product transfer and further advance applications. 

The applicant's plans should be discussed in view of their occupation, and reasonability of working beyond state pension age should be documented where appropriate.

We will require a ‘Customer Working Age form’ (PDF, 3.6MB) to be completed by all customers on an application where the mortgage term passes a working age of 70 for any customer. This form asks the customer(s) to confirm they have considered the implications of the term chosen and that they believe they can continue to work until the age indicated. The completed form will be required before we can proceed to offer.

Future retirement income will need to be verified where the customer is taking a mortgage term which extends beyond the lower of the declared ‘Anticipated Retirement Age’ or the maximum working age being applied.

Related topics

• Lending into retirement

• Employed - Current employment details collected
• Self Employed - 2 years history requested however, where the business has been trading for less than 2 years eg 1 year self employed and so self employed income is not available for 2 years, we will still consider these applications. You must record all full relevant years' income accurately on the mortgage application.

All mortgage commitments should be keyed as commitments with ‘Buy To Let' selected as mortgage type and the gross rental income keyed under Other income ‘Rental Income – from Buy to Let properties owned'.

The Rental income will be used to offset the BTL mortgage payments but will be not used within the affordability calculation itself.

Where the property is already let

Rental income can be evidenced by any of the following documents:

• Latest 3 months consecutive bank statements (showing rental income). (Internet bank statements can be used providing the date, customer name, account number and bank heading is clearly displayed)
• Tenancy agreement (current agreement required, in date and must be signed by both tenants and landlord/letting agent)
• Letter from accountant or solicitor
• Letter from letting agent - Statements of Account are not acceptable, and the letter should be on company headed paper and confirm;
  1. The customer's name
  2. The rental income amount, frequency of payment, and that the income is still being received
  3. The address of the rental property
  4. Signed and dated
• Internet bank statements can be used providing the date, customer name, account number and bank heading is clearly displayed
• If the Buy to Let is mortgaged, or being mortgaged with Lloyds Banking Group, a valuation report on file less than 6 months old can be used to show expected rental income.

If the property is to be let rental income can be evidenced by any of the following documents:

• Letter from the letting agent confirming the expected rental payment
• Letter from accountant or solicitor

We cannot accept rental income if the property is let to family or friends

Unencumbered Properties Only

Rental income can be used in affordability calculations if:

• There are no mortgages secured on any let properties, all properties must be unencumbered
• Your customer is declaring the income to the Inland Revenue and can evidence the rental income received by way of Tax Assessments and corresponding Tax Year Overviews
• The net profit declared from the rental properties should be treated as Self Employed income and keyed as a second job

The Self Employed income must be completed for each of the last 2 years as applicable.

If any of the following applies, the customer must be keyed as self employed;

• Where the customer has a shareholding of 25% or more
• If joint customers own 25% or more between them, treat both customers as self-employed (both applicants need to hold a % share)
• A sub-contractor who derives income from more than one contract
• A customer has a partnership interest in a business, i.e. income is not PAYE, irrespective of the percentage shareholding
• A customer owns a franchise
• A customer employed by a Private Limited Company (LTD) who receives a salary (PAYE) and dividends as part of their remuneration package
• A customer who is in a Limited Liability Partnership (LLP) and receives a share of Net Profits

For applicants who are classed as self-employed, you should capture all of their income under the field "Net Profit". Whilst some self-employed income we allow is not truly 'net profit', we use this field in our affordability assessment and in our policy rules. The Net profit field should be completed as following:

• Limited company key total of salary/remuneration + dividends drawn (as shown on Tax Calculation)
• Partnership (or LLP) key profit share (percentage of) Sole trader key net profits
• Sole trader key net profits

We require self employed income details to be entered for the latest 2 years trading. Figures should only be entered for each full year of trading. Where the customer has been trading for less than 2 years but for at least one full year the application can be considered and accounts are then our preferred method of income verification. Additional information may be required to support any application.

We will accept self employed incomes which include government Self Employed Income Support Scheme (SEISS) grant income.

The income level used in our affordability calculation will be the lower of the latest year or the average of the last 2 years.

A maximum LTI of 4.49x will apply on some applications where there is any element of self-employed income – please see our Affordability, LTI and Income Multiples criteria.

Acceptable Income Verification Documents

Latest 2 Years HM Revenue & Customs (HMRC) Tax Calculation accompanied by corresponding Tax Year Overviews –The year the Tax Calculation relates to and the Customer's name/initials must show. Tax Calculations can be obtained from the customer's online self-assessment account.

If your customer hasn’t registered for an HMRC Online account they can do this on the government website.

Your customer must wait 72 hours after fully submitting their return until they can print their documents.

The following details must be visible on the online Tax Calculation:

• HMRC logo
• Unique Tax Reference (UTR)
• Customer's name
• Tax year (most recent no older than 18 months old), and the following wording:
• "This is a copy of information held on your official online SA tax account with HMRC", and
• "Submission is 100% complete."

Online tax assessments produced by accountants' commercial software (accompanied by corresponding Tax Year Overviews) are acceptable provided they show the following:

• Unique Tax Reference number
• Customer's name
• Tax Year (most recent no older than 18 months old).

The tax due figure on the Tax Calculation and Tax Year Overview will usually exactly match. If there is a difference in the tax figure we will consider these but may require updated documents.

Latest 2 Years Full Accounts – must be finalised and clearly show the net profit (for Sole Traders), share of net profit (for Partnerships) or salary & dividends (for Directors of Limited companies). Profit & Loss statements alone are not acceptable. Where the customer has been trading for less than 2 years, we require accounts for the full year of trading.

The year end on all documentation must be the most recent and must not be dated more than 18 months before the date of application.

In addition for self-employed incomes the latest 3 months' bank statements for the account which is used for business purposes may be required.

In cases where the customer has more than one job, we will consider the following when deciding whether or not to take the secondary income into account. Hours worked, are they sustainable? Are the roles/skills similar? What is the distance between the jobs and the customers home? How long has the customer been in both jobs? Is the salary consistent with the type of employment? And the number of days the customer works per week.

Once all of the above has been taken into account and deemed acceptable, we will use the appropriate percentage of the second job income and it will be treated as per the standard income policy.