What counts as a repayment vehicle?

JimmyTheWig

Hi,

Our mortgage with Santander is in two parts.
The main mortgage is interest-only. There is a second part to the mortgage (taken out to extend the house) which is repayment on a very short term.

We are looking to move and so port the mortgage. Will probably be borrowing more on top of this (a third loan!).

We have a set amount of money set aside each month for mortgage payments. This is based on clearing the whole lot in 13 years time (20 years from when we originally took the mortgage). Currently this set amount is a few hundred pounds over the monthly payment, which goes into our general savings pot and is used to overpay which ever part of the mortgage attracts the most interest at the time (historically the second part, but now the main part).
Once the second loan is paid off this monthly amount won't reduce. It will all be used to clear the main mortgage.

A third loan will complicate this further and will extend the term of when we will repay the total, but this is fine for me to cope with.


But obviously rules have tightened with interest-only mortgages. When I spoke to someone on the phone they said that we would need to provide evidence of the repayment vehicle for the interest-only loan.
Now, I'm not sure what evidence I could provide right now. I am totally confident that we are paying off the mortgage on time. But, looking at loan 1 in isolation, we aren't. Will they accept my explanation of what we have been doing and what we will continue to do in the future? Or will they make us go repayment?
If they make us go repayment then will they let me extend the term of loan 2 so that we can afford the repayments on the whole lot?

Alternatively, what's the longest term for a repayment mortgage that they'll accept? I would imagine that there is very little difference between interest-only and, say, a 30 year repayment mortgage. I'm 36.


Thanks,

Jim

Dave_Ham

Hi Jim,

Not got a huge amount of time, but Santander will not accept any logical explanations or plans. It will need to be a robust plan, which can be verified. There are not many people that will necessarily have something suitable at your age (not meant to be patronising in any way - just factual)

Things like endowments, certain types of pensions, stock and shares (proof) another property with lots of % equity are common.

If not, typically depending upon employment type they will let you have a 34 year ish term without any serious additional evidence.

I think this is the likely outcome, although Santander have been chopping and changing a little bit with their products/criteria so always worth checking with them again. I tend to find the local branch advisors give more accurate information that the call centres.

Good luck

JimmyTheWig

Thanks Dave, that's all interesting stuff.

Just checked and a 34 year repayment is only £150 a month more than interest-only on loan 1. So shouldn't be a problem.

Also, if I do stick with the interest-only, will they check up that I'm keeping up with the repayment vehicle? Or can I carry on doing what I'm currently doing once I've demonstrated the ability to repay at the beginning?
If they're going to check up then I might be better off with the 34 year term anyway. At least then I'd be free to pay off whichever loan I wanted to with any extra money.

Dave_Ham

You are unlikely to get through the first stages as they will not accept "a plan you are about to start" like they did previously.

I would expect the repayment to be the only option, but good luck trying...

Thrugelmir

Why not switch the mortgage onto a repayment basis when you move home?.

What rate of interest are you paying on the part you wish to port?

JimmyTheWig

Thrugelmir wrote: »

Why not switch the mortgage onto a repayment basis when you move home?.

Yes, I certainly won't change anything just yet. Especially as my current deal is better than what they are offering for additional money when we port - so makes sense to keep this as high as it can be for now to minimise the amount of new borrowing.

What rate of interest are you paying on the part you wish to port?

4.24% fixed until around November 2014 on the main mortgage. 4% early redemption, iirc.

Conrad

Yea Jim, go long term repayment mortgage but make sure your age allows the term you require. Int only nearly always fails now and yes they do check your repayment plans on an ongoing basis.

Common sense does not apply in the world of mortgage regulation anymore. Nanny knows what's best for you!