Santander/Abbey mortgage - problems moving home

Dee62_2

I'm having trouble with my mortgage provider, Santander, regarding the Terms & Conditions of my mortgage with them and would be very grateful if someone with a better understanding than me on these matters could advise...

The background to the situation is that my wife and I moved house and took an interest only mortgage on our new property in spring 2008. The property was valued at £250,000 and the interest only mortgage was set at £212,495 (85% loan to value ratio with the £999 product fee added to the loan giving me a current loan to value of just over 85%).

We intended to start a savings plan as a repayment vehicle shortly after moving in but this was put off due to our finances being tight and we've never got back into a position of being able to do this.

Our circumstances have changed in that my wage has steadily dropped over the past four years to the point now that we are worried that any further drops will mean we're struggling to pay the mortgage.

In order to protect against this, we are considering downsizing to a house in the region of £170,000 to £190,000 as this will reduce the mortgage balance, monthly outgoings and the loan to value ratio of our mortgage. When I called Santander to discuss this yesterday though, they tell me that they will now only offer an interest only mortgage subject to certain conditions:

*maximum loan to value ratio of 75% (50% if it’s a new customer)
*a suitable repayment plan has been in place for a minimum of one year

Whilst these new terms do not make our move impossible it certainly makes it much more difficult and reduces our options substantially. If we get a good price for our sale and buy a house at the bottom end of our price range, we can just about make the 75% loan to value ratio. More importantly now though, they are insisting on is not impossible as they will not take it into account unless we’ve had it in place for at least a year.

In the Terms and Conditions booklet we were given when taking the mortgage out, conditions 19 states the terms under which the loan can be transferred to a new mortgage (ie – moving house). Point 19.4 states that :

“the following terms apply if, at the time you pay it off, the money you owe us does not exceed 95% loan to value : (note – we are just over 85% so I presume this applies to us)

(a) We will transfer the money you owe us to the new mortgage if:
(i) The amount we are prepared to lend you under the new mortgage including transfer balance does not exceed 95% loan to value;
(ii) You give us not less than seven days notice in writing that you want us to transfer the money you owe us to the new mortgage; and
(iii) You select a mortgage product for the new mortgage from the range of mortgage products available for loans which do not exceed 95% loan to value

(b) If the amount we are prepared to lend you under the new mortgage including the transfer balance would exceed 95% loan to value, we shall exercise our discretion in deciding whether or not to agree to the money you owe us being transferred to the new mortgage. If we agree, the transfer will be subject to the terms and conditions we then apply to loans which exceed 95% loan to value. If we do not agree, you will have to pay off the full amount of the money you owe us in order to discharge the mortgage.”

I’m no legal expert but that seems to suggest to me that, so long as our move does not result in our loan to value ratio rising above 95%, then they will allow us to move.

Santander are saying however that if we move then the old mortgage is repaid and the new one is treated as a completely new application, therefore their current lending criteria will apply (ie – maximum 75% loan to value and MUST have repayment vehicle in place for at least a year.

I should point out that these Terms & Conditions were printed in August 2007 and I realise that Santander’s terms will have changed since then but, if these were the terms that the mortgage was issued then surely the mortgage lender is legally bound to stick to them?

From my two conversations with them so far, they seem to be saying that these T&C’s are null and void once the existing mortgage is repaid and they treat the new one as a completely new loan and apply their current lending criteria and T&C’s.
I could completely accept Santander’s stance if we were asking for MORE money however we are trying to REDUCE our overall debt, our monthly outgoings and therefore reducing the risk of defaulting in future. Santander’s apparent lack of common sense is preventing us from doing that though and putting us at higher risk of defaulting in future.

Apologies this question is so wordy but just wanted to give as much background as possible.

Many thanks

Thrugelmir

Dee62 wrote: »

they treat the new one as a completely new loan and apply their current lending criteria and T&C’s.

Correct , this has always been the case. The lender has the right to evaluate both you as a borrower and the wider market conditions that determine commercial risk.

Santander’s apparent lack of common sense is preventing us from doing that though and putting us at higher risk of defaulting in future.

Lenders such as Santander apply policy decisions across '000's of mortgages not just yours. So commercial risk is assessed and determined at Board level. You are not being singled out even if it feels that way.

If you watch the news. Fully understandable why lenders are progressively tightening the screws. As could far worse before it gets better.

kingstreet

A mortgage is not transferable from one property to another. As has been stated, your old mortgage is repaid on the day you sell your current property.

If you are eligible, and satisfy your lender's criteria you may be granted a new mortgage and be able to transfer or port the rate from the old mortgage to the new one.

There is no guarantee you will get a new mortgage, particularly if your circumstances have changed for the worst - lower income, poor credit etc.

Simon_gloster

As kingstreet says, the rate is portable subject to you meeting the lenders criteria at that time. Abbeys IO book is massive.

I'm afraid your one of the classic IO customers. Our "intention!!!!" was to set up a repayment plan. Not the lenders fault, if it was repayment from outset you probably would do repament again as you would have been used to the payments.

The criteria you posted is all about porting LTV's, completely irrelevant to the main situation you have an issue with, ie monthly payments.

If your on a good rate, the only way to keep it is doing repayment or if int only proving to them you have existing inveatments etc

Any other lender would ask for exactly the same information these days and limit you to 75% LTV or less.......or not at all!!!!

To move home it seems Abbey will tell you what to do not you calling the shots.

Dee62_2

Thanks for both your replies. Much appreciated.

Still can't understand though why the T&C's has very specific wording which explains when they will and won't transfer a loan to a new property... if they effectively clear the old loan and then you have to apply for a new one anyway.

Interestingly, what both advisers I spoke to there told me contradicts this too. So long as the LTV is below 75%, there is a repayment vehicle in place and the new property is acceptable as security, they will transfer the loan to the new one. Both specifically said it's not a new application. They don't credit score or require details of your new income, etc.... so long as the new property surveys OK and the LTV is below 75%.

Simon_gloster

I'd like to think those 'advisors' are wrong. When I used to use their introducer system, never did I not have to do it from scratch. Its the norm. It would even bring the ported rates across. Ifhe customers had no income, they wouldnt allow the house move even if they were affording their current payment.

FSA regulation on treaty customers fairy falls into line here. Even on a house move with a loan decrease.

I can only think of LTSB who would honour old lending policies for int only where no proof is needed to repay.

T&C's mean nothing to Abbey on int only as they never made any contractural guarantees to their borrowers and could change policy as and when they like.

I hope its not a bore draw tonight!!!!!

Thrugelmir

Dee62 wrote: »

Still can't understand though why the T&C's has very specific wording which explains when they will and won't transfer a loan to a new property... if they effectively clear the old loan and then you have to apply for a new one anyway.

Much has changed since 2008. In particular the Global Financial Crash following the demise of Lehmans. The mortgage market is now very different. With far tighter underwriting criteria.

Dee62_2

Simon_gloster wrote: »

FSA regulation on treaty customers fairy falls into line here. Even on a house move with a loan decrease.

Can you elaborate on that point Simon?

Thrugelmir wrote: »

Much has changed since 2008. In particular the Global Financial Crash following the demise of Lehmans. The mortgage market is now very different. With far tighter underwriting criteria.

This part is not in dispute. Anyone who would try to argue against this statement is a fool

The point I'm making is that the terms of the mortgage I entered into state when I can and can't transfer the loan to another property. It seems to me it's perfectly within those terms so am surprised, and maybe not even convinced, that Abbey/Santander can refuse to honour that contract.

It could be that they are within their rights to change these terms as and when they like but I've read nothing so far in the T&C's that tells me it's the case