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Lending criteria

Each application presented to The Cambridge is assessed on its own individual merits.

Below you can find some of the key information from our lending criteria that you may find useful. You can also download our full lending criteria. If you have any questions please contact our Business Development Team on 0345 601 2744.

Full Lending Criteria


Key information

1. Lending area
2. The applicant
3. Affordability
4. Buy to Let
5. Interest only
6. New builds
7. Property type
8. Expatriates
 


1. Lending area

We lend within the following counties: Cambridgeshire, Norfolk, Suffolk, Essex (excluding Canvey Island), Hertfordshire, Buckinghamshire, Bedfordshire and Northamptonshire.

For existing members and their immediate family, consideration will be given to applications on properties in other parts of mainland England and Wales (including the Isle of Wight and Anglesey) in accordance with the table below:

Existing Members Lending Area
Existing saver living in the Society’s lending area Lend anywhere in UK other than Scotland or Northern Ireland
Existing borrower living in the Society’s lending area Lend anywhere in UK other than Scotland or Northern Ireland
Existing saver living outside the Society’s lending area Lending restricted to the Society’s lending area
Existing borrower living outside the Society’s lending area

Lend anywhere in UK other than Scotland or Northern Ireland


2. The applicant must:

  • Be aged 18 or over (over 21 years for Buy to Let). There is no upper age limit at the end of the mortgage term
  • Have the legal right of residency in the UK
  • Be able to provide address history for the past three years
  • Be applying for a mortgage term between five and 35 years
  • Be purchasing / remortgaging a property within the Society’s lending area (See lending area above)

3. Affordability

Affordability is the principal and overriding factor in assessing a mortgage application.

When considering the level of borrowings suitable for your clients needs, we will utilise an Income and Expenditure (I&E) formulae to ensure affordability.

A detailed I&E form must be submitted with each residential Decision in Principle (DIP) but is not required for a Buy to Let.

The affordability assessment is linked to data from the Office of National Statistics (ONS) to determine the level of expenditure expected for the household composition given.

The Society will take full account of

  • the income of the borrower(s), net of income tax and national insurance, and, as a minimum
  • the borrower’s committed expenditure and
  • the basic essential expenditure and basic quality-of-living costs of the borrower’s household

Affordability will be assessed on the basis of both repayment of capital and payment of interest over the term. The Society will also take account of the impact of likely future interest rate increases and any known changes to the borrower’s financial status within the foreseeable future.

The Society will not

  • rely on a general declaration of affordability
  • use income multiples as a basis of assessment of affordability

Examples of committed expenditure:

  • Credit commitments, such as loans and credit cards
  • Hire purchase agreements
  • Child Maintenance
  • Cost of a repayment strategy where borrower has an interest only loan

Examples of essential expenditure:

  • Housekeeping (food and washing)
  • Gas
  • Electricity and other heating
  • Water
  • Telephone
  • Council tax
  • Buildings insurance
  • Ground rent and service charge
  • Essential travel

Examples of quality-of-living costs:

  • Clothing
  • Household goods
  • Repairs
  • Personal goods
  • Basic recreation (television, recreational activities, non essential travel)
  • Childcare

The Society requires a contingency buffer of either 15% or 10%, dependent on the applicants’ net monthly income, after all expenditure has been taken into account.

Please refer to the table below to see which level of residual income will apply:

    Minimum % Residual Income Required
Applicant's total net monthly income ≥ £3,000 10%
Applicant's total net monthly income < £3,000 15%


Calculation of the mortgage payment for affordability purposes

For all products:

The mortgage payment within the I&E must be calculated at the Society’s Standard Variable Rate (currently 4.74%) plus 1.5%, on a repayment basis, over the chosen term.

Interest only loans

Where the loan has been agreed on an interest only basis, and therefore meets the Society’s interest only lending criteria, affordability may be assessed on the basis of interest only over the term. If there is a payment into a repayment plan, the premium or contribution must be taken into account on the I&E.

Fees

If the applicant chooses to add any fees associated with arranging the mortgage to the loan, these fees will need to be included in the total mortgage balance, when calculating the monthly repayment for the purposes of affordability.


4. Buy to Let

  • Be aged 21 or over. There is no upper age limit at the end of the mortgage term
  • Mortgage term five years – 35 years
  • Borrowers to have minimum income of £25k
  • Maximum LTV 75%
  • Borrower must currently or have previously owned their own home
  • Rental income must be at least 140% of 5.50%
  • The property must be let on an Assured Shorthold Tenancy (AST) agreement. Our normal requirements are for a minimum term of six months and a maximum term of two years
  • We are unable to lend on Houses in Multiple Occupation (HMOs)
  • Each individual borrower will be limited to a maximum portfolio size of five Buy to Let properties with The Cambridge (max total borrowings £2m)
  • Where the property is to be let to a family member, please contact our Business Development Team for more information

5. Interest only

  • Maximum LTV 70% with a repayment vehicle
  • Acceptable repayment vehicles include Endowment, Stocks & Shares ISA, Pension & Investment Plans - each repayment vehicle has its own restrictions in regards to our requirements. Please contact us on 0345 601 2744 for further guidance
  • Maximum loan size £500,000
  • Where sale of property is the repayment vehicle the LTV is restricted to 66% LTV and there must be at least £225,000 worth of equity

Where the loan has been agreed on an interest only basis, and meets the Society’s interest only lending criteria, affordability may be assessed on the basis of interest only over the term. If there is a payment into a repayment plan, the premium or contribution must be taken into account on the I&E.

A borrower may choose to take a mortgage on a part repayment, part interest only basis. The lending policy, as stated, in relation to interest only loans will apply to the interest only element of the loan. Where a borrower wishes to have a mortgage of more than 70% LTV on a part and part basis, any borrowing over 70% must be on a repayment basis.

Part and part mortgages are subject to a maximum of 80% LTV.


6. New builds

A property is classed as a new build if registered within the last two years

Residential lending:

  • New build flats restricted to a maximum of 80% LTV
  • New build houses restricted to a maximum of 90% LTV

Buy to Let lending:

  • New build flats restricted to a maximum of 75% LTV
  • New build houses restricted to a maximum of 75% LTV

When applicants are purchasing a new property from a builder any inducements that the builder is offering e.g cashback or deposit paid may have an effect on the total amount we will be able to lend. In general the amount of the inducement will be deducted from the purchase price and lending will be based on this lower figure.

The valuer should be made aware of any inducements to purchase so that he can comment on them in his report. The valuer will request a CML form, before submitting the valuation report to us.

If the property has been built or converted for use as a dwelling within the past ten years, or is to be occupied for the first time, you must ensure that it was built or converted under a new home warranty scheme acceptable to us. We accept the following schemes:

  • NHBC (National House Building Council)
  • LABC (Local Authority Building Control)
  • Premier Guarantee 
  • Build Zone
  • BLP (Buildings Defect Insurance)
  • CRL
  • Zurich policy this will continue to be honoured (Zurich stopped offering policies in 2009).

7. Property type

  • Houses – if the property is valued at below £120,000 the maximum LTV we will consider is 80% LTV
  • Listed properties – Grade 1 listed properties not acceptable
  • We do not lend on properties with agricultural restrictions
  • Flats
    - Max LTV 80% / New Build 80% LTV
    - Max four storeys
    - Not acceptable above commercial premises
    - Studio flats are not acceptable security
    - Freehold not acceptable
  • Leasehold properties – the lease must have a minimum of 60 years to run after the completed term of the loan

8. Expatriates

  • We will only lend to an applicant that has been living outside of the UK for less than 12 months. The only exception to this will be where the applicant has an existing mortgage with The Cambridge.