Santander - further borrowing

mas0282

Hi all

Looking to get some views from the mortgage broker community please :-)

I have had a mortgage with Santander for two and a half years. It is interest only. I would now like to borrow some further funds for home improvements / debt consolidation for home improvements I've already done (I don't need to do this but the rate from Santander is better than the rate I am getting from my existing loan provider).

Santander have said that they will lend me an additional 60k in principle, but that they will only do this if I switch to a repayment mortgage (the whole mortgage, not just the additional borrowing).

However, they are refusing to give me a firm offer on the additional borrowing before I change to a repayment mortgage. They say that I have to change to repayment first, and only then will they process an application for the further borrowing.

This seems a bit unfair, as I could change to a repayment mortgage and they might then turn around and refuse to lend me any additional funds. I don't mind agreeing to repayment as a condition of receiving the additional funds, but they wont even process the application until I switch to repayment. I have complained about this but they won't move.

I know that an offer in principle is just that - no guarantee. But if I have a decision in principle, does anyone have any idea how common it is for a full application to be rejected later on? Or if there are particular things that might trigger this that aren't picked up in the decision in principle?

If it helps the figures are as follows:

Property value - £650,000
Current mortgage (interest only) - £350,000
Additional borrowing - £60,000 (so a total mortgage of £410,000)

Of that £60,000, I will use £14,000 to repay existing debt relating to previous home improvements and the rest will go on future home improvements.

Any thoughts appreciated.

Thanks

mas0282

Sorry, forgot to say that my income is £82,000. So yes, it will be 5x multiple but is affordable from my perspective.

Dave_Ham

I would not be trusting Santander, certainly not at the moment.

Unless you are tied in you will be on 4.24% rate and therefore given your Loan to value and equity, remortaging to a new lender will give you a better rate, the improved borrowing on a better rate and the ability to remain on interest only if you wanted to...

All the best

mas0282

Dave

Thanks. To explain, I have a 2.99% fix which has 20 months left to run. I can keep that rate if I change to repayment. Any additional borrowing(£60k) will be at a slightly higher rate of about 4%, which is fine.

If I remortgage now, I will have to pay a £10k ERC.

I called HSBC about their 2.99% fix for 5 years and they approved me in principle to borrow £390,000 on interest only. It's quite tempting to just ditch Santander but the £10k penalty is putting me off - it's a lot of money.

Dave_Ham

Remembering that most mortgage offers are valid for 3 or 6 months, can you hold on for another year or do you need to do this all now..?

Aside from this, it really is a case of trusting Santander - which is no easy thing given their recent behaviour.

Serious dilemma though...

mas0282

Thanks again. I would like to do this now really because the cost of my other borrowing is ridiculous (loan from HSBC at 15% - have NO idea why it was so expensive, my credit record, income etc are all very good).

Just out of interest, what have Santander been up to to make you think that they are not so trustworthy (if you can say)?

Dave_Ham

Have a read up on the forums, but essentially due to liquidity and toxic back book issues they changed their criteria about February and since then have been a nightmare.

They want everyone off interest only and are quite ruthless in the execution.

Given your status they may be more trusting, but they have been pulling a few naughties of late.

I imagine, your Early Redemption will not change so if they do not honour worst ways you will remortgage elsewhere on better terms.

The 5 year HSBC rate, may even save you the ERC given the mortgage value and the assume second charge of £60k with additional product fees ongoing due to 2 different product dates on your mortgage..