In this section we cover:
Property concentration exposure limits
The Mortgage Works will consider its overall exposure by applicant, geographical area and development when assessing applications. These exposure limits are per applicant and the number of units include securities mortgaged to other lenders and/ or unencumbered properties. The maximum concentration that can be considered per development is:
|Development Size/Road||Maximum Concentration|
|1-3 Units||1 Unit if a purchase application.
|4-20 Units||25%, rounded down to the nearest unit|
Maximum of 10 in a postcode up to the first digit of the second grouping (e.g. BH2 6)
The Mortgage Works customers aren’t allowed to live in the Buy to Let property at any time and will be in breach of the terms and conditions of the mortgage contract should they choose to do so. Where this is the case, The Mortgage Works's policy is to give the customer a period of time in which to vacate the property, or instead remortgage to a residential loan. If a customer fails to comply with these terms, this may lead to legal action being taken against them, which could ultimately result in The Mortgage Works taking possession of the property.
Minimum property value / purchase price
£50,000 (apart from HMO which will need a minimum property value of £100,000).
New build buy to let applications
New build flats and houses are defined as:
- A house/flat built within the last twelve months
- A house/flat built over twelve months ago but still owned by the developer
- A house/flat built over twelve months ago but the first purchase/legal completion of the property was less than twelve months ago
- Applications for new build flats accepted up to a maximum of 65% LTV
- The Mortgage Works instructs its valuers to value all new properties (flats, houses and maisonettes) on an 'as new' basis
- If new, or built within 2 years, the security must have a warranty guarantee under NHBC, Premier, LABC, HAPM, Global Home, Castle 10, Build Zone, Build Assure, BLP, Zurich Municipal, CRL, Q Policy or have a qualified Architect’s, Surveyor’s or Structural Engineer’s Supervision Certificate (Professional Consultants Certificate).
New build property lease terms (includes office conversions)
- Minimum acceptable lease term on new build properties is 125 years for flats and 250 years for houses.
- Maximum starting ground rent on all new build properties with a leasehold tenure is limited to 0.1% of the property value.
- Ground rent must be reasonable at all times during the lease term. For example, ground rent escalation should be linked to RPI (Retail Price Index) or a similar index, and unreasonable multipliers of ground rent will not be permitted, for example doubling every 5, 10 or 15 years.
- Leasehold properties must have a minimum lease of 70 years at application.
- The valuer must be satisfied that there is a market for any property taking the lease term into consideration.
- Although an application may meet the guidelines above, the property may still be declined by the valuer, e.g. a mortgage application in England for a 20 year term with a 71 year unexpired lease is within policy, but the valuer may advise the property is not readily marketable and saleable and we will therefore not consider the property as suitable security.
- We expect lease terms to be reasonable and the valuer must be satisfied there is a market for any property, taking the lease terms into consideration.
- Where the valuer believes marketability will be impacted by the lease terms, they may reflect this in their valuation, e.g.
- Where ground rent escalation is linked to the value of the property or an index greater than The Retail Price Index (RPI)
- Where lease clauses appear onerous, e.g. disproportionate Service Charges or Event clauses for normal use, such as installing an aerial
- Some lease terms will impact marketability so severely they will always result in the property being declined, e.g
- Where ground rent is greater than or equal to 0.5% of the property value, or where the review period is less than or equal to 5 years.
- Where ground rent doubles in less than 20 years (e.g every 5, 10 or 15 years) or escalates by compounded RPI
- Please note that there are different limits for acceptable New Build Lease Terms – see New build property lease terms above for details
These examples aren’t exhaustive, and the solicitor is expected to refer back to us any lease terms they feel may affect the value or future saleability of the security.
Purpose built flats and studio flats
The internal floor area must be no less than 30 square metres. Studio Flats must contain a separate bathroom.
Properties next door
Applications where the proposed security is attached to a property owned by the applicant i.e. terraced or semi-detached are subject to the following criteria:
- New purchase applications are not accepted
- Remortgage applications for either / both properties are acceptable subject to the applicant having owned and rented both properties for a minimum of 12 months
- Maximum of 2 attached properties that are owned by the applicant (3 or more attached properties in a row are unacceptable)
- The Property cannot be adjoining to the applicant's main residence (where owned).
- Property developers (a person who owns 25% or more of a business whose principal activity is property development) are not accepted
- Applications for properties that have been built or converted by the applicant are accepted, subject to the property being let for a minimum of twelve months at the time of application.
Local Authority flats
A flat in a Local Authority or Ex Local Authority block of more than 5 storeys will be considered where the security is in Greater London.