Santander affordability credit card payment double-counting?

redonion

This calculator showed for me a dramatic effect of "monthly credit card repayment" on the amount that they think is affordable for me to borrow:

http://www.santanderforintermediaries.co.uk/calculators/affordability.aspx

For me, the function of my credit card is to pay for things, not to borrow money, except incidentally. So there's strictly no such number as "monthly credit card repayment", since I pay the full amount each month - it's not always the same amount. The only obvious way to interpret that I can see is to enter the same in the repayment box as in the balance box.

If I do that, my max affordable borrowing as they see it drops by a factor of about 2 as compared with, say a third of that figure. Why is that? It seems rather odd, because these credit card borrowing and repayment numbers are entirely in my control and have very little effect on my finanaces: if I want them to go to zero, I can do that whenever I choose.

The only explanation I can think of is that they are double-counting outgoings? i.e. I'm guessing they are assuming that the credit card payment is additional to all of the other. On the other hand, that would be an odd assumption for them to make, because plenty of people pay off their credit card bill in full every month, and credit cards are typically used to pay some of one's outgoings!

witchy1066

I would presume you put a 0 in the credit card payments box

redonion

witchy1066 wrote: »

I would presume you put a 0 in the credit card payments box

You mean one should do that in my situation, right?

Why?

Now that I think again, I suppose you could see it as something like "repayments towards a long-term debt". That sounds more understandable! But it's not what it actually says, the way I read it anyway!

Thrugelmir

These calculators are only a guide and should be viewed as such. Given that individuals borrowers circumstances vary. Simply not possible to factor in every permutation into an online calculator.
The calculators are no indication either as to the success or not of an individual mortgage application.

redonion

Thrugelmir wrote: »

These calculators are only a guide and should be viewed as such. Given that individuals borrowers circumstances vary. Simply not possible to factor in every permutation into an online calculator.
The calculators are no indication either as to the success or not of an individual mortgage application.

I don't believe this is caused by some esoteric combination of parameters, nor is it a small effect. I think it's a badly labelled field.

amnblog

Santander will count any balance on your credit cards at the time of application against affordability. This happens whether you pay them every month or not, or even if you will clear them in full on, or before, completion.

redonion

amnblog wrote: »

Santander will count any balance on your credit cards at the time of application against affordability. This happens whether you pay them every month or not, or even if you will clear them in full on, or before, completion.

That may be true, but I think it's not relevant to my original question.

Interesting to hear though. I asked my broker whether that was the case, and whether I should pay it off (which I could have done in 5 mins). He didn't know.

Dave_Ham

Why engage a mortgage broker and then get to this level of detail yourself?

I recall another thread where the issue is lending limit is tight, so I understand why you are trying to establish this and I think AMN did address the question.

Santander automatically assume debt levels will remain constant from pre and post completion and therefore any balance will be factored into affordability.

Whether you are happy or think their calculation is robust is largely irrelevant, as it is what it is.

Poor show from your broker though.

Have you have a decision yet?

Senior_Paper_Monitor

AMN and David are correct - also bear in mind that:
1) they will continue to use the same data set for 60 (I think from memory) days, unless you are a Abbey/Santander when strangely they will consider using fresh data
2) when you pay off any amount in may take some time for it to reflect in the credit report (and they take what they see there as gospel)

We are now uber cautious in evaluating and stage managing credit accounts for Abbey applications.

Personally I think the evaluation model is barking mad, but my or your opinion has no impact on this - simply that's how it is.

Its a killer for anyone who runs up business expenses on their personal credit card and then reclaims them .

HappyMJ

If you pay a credit card in full each month then the amount you pay does not count in an affordability calculation. Otherwise as you say the amount will be double counted due to the balance being normal spending during the same month.

Senior_Paper_Monitor

Not always the case MJ - depends on when report snapshot is taken and the reporting cycle.