Clydesdale Bank has announced a series of changes to how it assesses self-employed mortgage applications.
As part of the changes, the bank is expanding its maximum loan to income cap for residential lending where any applicant is self-employed from 4.49x to 5x income.
The cap for residential remortgage applications up to 85% LTV where there is no additional borrowing will remain at 5.50 x income for all employment types including self-employed.
For limited company directors with a shareholding of 25% or more, Clydesdale will now assess the two-year average of the share of net profit after corporation tax (previously it was assessed before tax), plus director’s salary. If the most recent year is lower, the bank will use that.
In addition, the minimum trading period is reducing from a minimum of three years business operation to two years.
Finally, the financial year end date of the last accounts filed must be no more than 18 months prior to the date of the application, down from 21 months previously.
