Paragon caps LTV and overhauls requirements for BTL apps

It has withdrawn its short-term finance and holiday let deals, will not consider properties which are or will be let to students, and applicants will need to provide a Covid-19 business plan coping strategy.

Applications for houses in multiple occupation (HMO) and multi-unit blocks (MUBs) will be placed on hold until physical valuations can be performed, but it is using desktop valuations where possible.

The lender is making the changes to accommodate the restrictions on in-person valuations and other impacts of the coronavirus crisis.

It said some existing pre-offer applications could be affected but that it was talking to brokers and customers about that.

In a note to brokers on its website Paragon said it wanted to support intermediaries and customers by continuing to accept new business and processing applications already received.

“In order to do that, we have reviewed some of our requirements and changed our product range slightly, so that we can concentrate on our core business,” it said.

“In light of the current physical restrictions in place, we’ve implemented desktop valuations on properties that are either single self-contained units or have up to four tenants.

“This type of property application will need to be supported by a completed property information form, which can be found in the documents section of our website,” it added.

Valuation process

Desktop valuations cannot be used on houses or flats worth over £750,000 nationally or over £1m within the M25, and high-rise flats above six storeys with potential cladding issues.

Paragon said these would still require in-person valuations and brokers should contact the lender if they need to discuss its suitability.

HMO and MUB applications will be referred to in-house surveyors and if they confirm the property is acceptable, the application will be processed with the valuation instructed as soon as the physical restrictions are lifted.

The referral will not include any assessment of the value and rental income, which can only be verified by the physical inspection.

Covid-19 business plan

Paragon is also requiring additional documentation from applicants.

This includes a detailed business plan that outlines the split of tenant type across the portfolio, the applicant’s Covid-19 strategy for the next three to six months, and any contingency in place to cope with rental income disruption.

Other required documents are:

• A completed property information form for all single self-contained unit properties and properties with up to four tenants
• Net worth statements for all applicants
• Last three months’ rental bank statements to confirm all rental income and investment mortgage payments.

A Paragon spokeswoman told Specialist Lending Solutions: “We remain open for business and have introduced a maximum LTV of 75 per cent, which we believe is a prudent and sensible measure to take in the current environment.

“We are talking to a small number of customers in our pre-offer pipeline where the application sits above the current maximum LTV about how they can bring it in line with our criteria.

“We are working with our brokers to ensure minimum disruption to customers.”

It also has smaller residential and second charge lending operations but has not yet published any changes to these.