Refused additional borrowing

MeMyselfandI

Hi all,
We have a mortgage with Santander of £44k, with 8 years 10 months to run on it. We came out of our fixed rate about a year ago and were ok on the SVR until recently when Martin Lewis advised that rates may go up, so I decided to fix again. I got a deal from Santander at 3.49% for 5 years which I was happy with. All went swimmingly. My husband and I then decided to try for additional borrowing of £12k for home improvements, to "landscape" the outside, put down a concrete back yard, build a wall we need built etc. All seemed fine, we were approved in principle on Friday and then went through the application process today, where we were turned down.

The house is worth at least 160k, our joint earnings are about 31k. I have an overdraft on my Santander current account of £2500, and 2 credit cards (not maxed out) with £3100 on them. We also have a Santander car loan of £5500. I have a late payment for one credit card about 9 months ago. We have never missed a mortgage or loan payment. Other than that our credit files are fine.

We have used the OD and loans to do bits and pieces to the house and part of the additional loan was to pay the OD.

We were told it was affordability issues but no other reasons. Is it worth appealing this decision, or should we just suck it up? I do wonder if I had requested the additional borrowing before I fixed would it have been a different decision? Should we look for lending elsewhere? I don't want to damage my credit rating by having more searches though.

Thanks in advance!

GMS

If you look for lending elsewhere you will need to pay any penalties to come out of your fixed rate or go for a second charge loan.

A broker may well be useful here.

Ask Santander about the appeals process but usually they want to see a Santander savings account with 3 months net salary in as a minimum and no arrears on loans. The late payment on the credit card may be a concern for them.

Thrugelmir

MeMyselfandI wrote: »

I have an overdraft on my Santander current account of £2500, and 2 credit cards (not maxed out) with £3100 on them. We also have a Santander car loan of £5500.

Currently you owe £11,100, and now you've applied for a £12,000 loan to landscape the back garden. Using the equity in your property to obtain hopefully cheap finance. Pretty obvious what the underwriters will think. As may provide the solution but doesn't address the cause.

Lenders now have a duty to lend responsibly. So little point in appealing to Santander.

MeMyselfandI

Thanks GMS. I wondered if the late payment would have had something to do with it. Would it be worth waiting until the late payment drops off the file and trying again?

MeMyselfandI

Thrugelmir thanks for your comment. I hadn't actually looked at it that way as believe it or not the additional borrowing is actually for home improvements as our children are needing somewhere safe to play! I had thought it would be ok our equity is good. All this was disclosed before the application process and I guess I am miffed that it is now a search on my file for no reason.

Thrugelmir

MeMyselfandI wrote: »

Thrugelmir thanks for your comment. I hadn't actually looked at it that way as believe it or not the additional borrowing is actually for home improvements as our children are needing somewhere safe to play! I had thought it would be ok our equity is good. All this was disclosed before the application process and I guess I am miffed that it is now a search on my file for no reason.

Nothing personal in what I said. Underwriters will take a very pragmatic view of your personal financial situation. I suspect the concern that stands out will be the overdraft. As this this a clear indication that you have no ability (i.e. savings) to withstand a financial crisis of any kind.

MeMyselfandI

No offense taken, I actually looked at the situation differently because of what you said and I think you are right. Looking at black and white figures it would appear like that. I also suspect that you are correct with regards to the OD, we don't have any savings.

We have been living on my salary and my husbands part time salary for over 3 years, he was a bricklayer and work dried up very quickly, we have been living very well (after finding MSE Forums!) on a very small budget and paying off any debt as fast as we can.

I guess what I am trying to say while rambling on a bit is that all things considered I think it has been a blessing in disguise that we were turned down and I think we will tighten up the budget a bit again (have been very lax recently & not very MS at all!) and pay off all our debt before taking any further credit.

Thanks for the advice

amnblog

No point appealing. You could consider a secured loan form another source to avoid a hefty early redemption charge on remortgaging.

Thrugelmir

MeMyselfandI wrote: »

Thanks for the advice

The Debt Free Wannabe forum is a great place for support and advice on your journey. Many others have had their light bulb moments.