Turned down for additional lending on mortgage - normal criteria? Other options?

togarama

I was turned down for additional borrowing on my Abbey/Santander morgage this morning. This wasn't unexpected since I've only had the mortgage for 9 months and had heard that they were operating a very restricted lending policy. However, I was surprised to be turned down on their "affordability criteria" rather than for any other reason.

They told me that the average monthly outgoings for someone like me were double the figure I'd given them, and that they would have to base their affordability calculations on this "average" UK figure with my personal commitments added on. Does this sound typical?

It all left me wondering whether I'd described something wrongly or misunderstood a question. (e.g. The "average figure" they quoted included travel and petrol costs. However, they insisted on counting my commuting costs on top of this since I have an interest free season ticket loan from my employer. Doesn't this mean that they've counted travel twice? I have similar thoughts about the pension contribution questions.)

In brief, I have around £16,000 on three 0% credit cards, one of which is due to expire this autumn and the others in the spring. I'm paying minimum payments each month (around £250 altogether) and chunks whenever I can afford it. My flat is valued at £259,000 and I have £161,000 outstanding on the mortgage. I earn £47,000 in a stable professional job where I've worked for nearly 10 years. My husband isn't on the mortgage as he works freelance and has an irregular income. We have 1 dependent child.

The credit card debt is largely moving costs which we were hoping to pay off from my husband's earnings but for a number of reasons this hasn't happened. (Yes, I do feel pretty stupid for believing that he would/could take care of it and won't be making that mistake again.) I could try to move to a new 0% deal in the autumn and pay a BT fee but as I can't count on this FY being any better for husband, I considered putting the debt on the mortgage and reducing my monthly payments instead.

As we don't drive, haven't taken a holiday in 3 years and only buy second-hand clothes and furniture it feels a bit odd to be told that assessment of my ability to afford a loan has to be based on a lifestyle which we don't have.

CLAPTON

often, paying only the minimum on CCs is seen as being in financial difficulties
also although your intention was to 'consolidate' your CC debts into the mortgage, of course they have no guarentee that you will do so

jamesd

Set up a standing order to pay £1 extra off each card about four days before the payments are due. This will avoid having a "minimum payment only" entry on your credit report each month or the cards. Minimum payments only are taken as a sign that you're in financial trouble. £1 a month per card is a cheap way to avoid that.

With a £47,000 income you should be able to get more balance transfer deals, up to about £23,000 total. So be sure you close the cards as you BT from them. Note that MBNA are good at offering new offers, usually, so it's often worth keeping around a Virgin or other MBNA-based card for a month or three after clearing it in case you get a worthwhile offer.

When you have 0% balance transfer deals you can make more money and pay off faster if you put the extra cash you have into a savings account, then use it to pay as much as possible off the card if you don't get a new balance transfer deal. The interest you make is extra money that you can use for repaying and it didn't cost you anything because the cards are at 0%.

togarama

Thanks both.

It would make sense if the loan was refused because of the implications of regularly paying only minimum payments on CCs. I'll think about setting up a regular payment between dds to alter this pattern and apply for another 0% offer in the autumn when one of my existing offers expires.

Thanks also for the reminder to close the cards I've paid off already. I've got a couple now at zero balance which I should have cancelled months ago. No point in keeping them hanging round.

jonesMUFCforever

Salary of £47k per annum Santander mortgage of £161k or 3.42 times salary.

Most lenders will lend 3.5 times salary for a single applicant so margins are tight - IMO this is why they refused your application.

Have a word with a mortgage broker who MIGHT be able to get you a lender willing to borrow more but you will pay a premium for it.