Santander further loan insanity.

Degenerate

So here's the scenario:

I earn £50K a year.

I own a 3 bed semi in Surrey, value around £340K, currently mortgaged to £140K.

I also own a studio flat in Surrey, value around £120K, unmortgaged.

I also own a flat abroad, worth around £75K, unmortgaged.

I now have an opportunity to invest in a property development business with some friends. The investment will be into a limited company that is purchasing and developing a property. I require around £60K for my share. I figured the easiest way to raise this would be as a further loan on my house, bringing the mortgage up to £200K. This is well within LTV and affordability requirements.

So I called up Santander's further loans department and went through the initial questions. The advisor said that LTV and affordability looked good, in principal there should be no problem. She was just about to pass me through to a specialist, when she asked what the money was for. I made the stupid mistake of telling the truth. Halt everything! We don't lend for that! If only I'd said home improvements.

The advisor readily acknowledged that LTV was fine (less than 60%) and affordability too (based purely off my job and not relying on any business income). Even though I could lose the lot (which is not likely) and I'd still be able to repay my mortgage, they simply wouldn't budge, they don't lend for that purpose, ever.

Aside from the total lack of logic here (if the borrower is well within affordability and LTV criteria, why does it even matter what they want the money for?), Does anyone know a way around this?

foxy-stoat

You cannot lie so if you need £60K for a business you have to say its for a business otherwise it would be fraud, then you could try a business loan with one of your properties as security.

Not sure if the lender would ever find out but fraud is very serious.

Either that or sell one of the properties.

amnblog

Their rules are their rules and you went in 'blind'.

Your options are

1. Re-mortgage with another Lender
2. Raise the extra with another Lender

Both options achievable via a mortgage broker.

AnotherJoe

I don't think it's insanity. They aren't in the business of arranging business loans, they do residential housing. That £60k should be lent to someone buying a house, not someone starting up a business.

Obviously there are ways round it, such as lying, but Santanders business is in understanding loans against property to be used for property, not the viability of your particular business.

Conrad

Degenerate wrote: »

why does it even matter what they want the money for?

Your'e forgetting Britain's suing culture. Lenders cannot guess which applicants might one day sue them and as such need to have blanket bans.


Here's how the scenario could play out;


1) They actively lend you money for this business venture


2) It all goes wrong and one way or another everything gets on top of you can so you go into arrears with Santander (its no good you saying it wont happen, these things do happen and lenders have hundreds of years of experience of this). Failed business ventures can have ripple effects on your life generally / your main job


3) Santander takes you to Court. At the repossession hearing you WILL argue in any way you can to stave off repossession. As such you could say "well M'lud, they accepted this was a loan for a business / investment venture that went wrong, they were happy to lend, its not my fault it went wrong, if they were so bothered why did they lend me this money for this purpose in the first place"?


A business / investment venture is by it's very nature more risky borrowing otherwise everyone would be throwing money at it.


I've dealt with one off and more professional developers all my working life and things can go wrong, delays ensue, people get sucked into a vortex of spiralling costs.




Anyway you could remo elsewhere.

Thrugelmir

Degenerate wrote: »

Aside from the total lack of logic here (if the borrower is well within affordability and LTV criteria, why does it even matter what they want the money for?), Does anyone know a way around this?

The logic is that Santander (as in Residential Mortgages)aren't in the market for your business. Not their speciality. Sell an existing property or seek finance through a more appropriate channel. Such as Santanders small business lending arm. There's horses for courses.

Degenerate

AnotherJoe wrote: »

I don't think it's insanity. They aren't in the business of arranging business loans, they do residential housing.

And they do further loans against residential housing, which can be used for a variety of purposes. Including buying and renovating other properties. As long as you don't try to be smart by forming a company.

Conrad wrote: »

3) Santander takes you to Court. At the repossession hearing you WILL argue in any way you can to stave off repossession.

If I got into trouble with this project, the worst that would happen is I'd lose the £60K I was looking to borrow. If I got into trouble more generally, I'd sell the mortgaged property before it ever got to court.

As such you could say "well M'lud, they accepted this was a loan for a business / investment venture that went wrong, they were happy to lend, its not my fault it went wrong, if they were so bothered why did they lend me this money for this purpose in the first place"?

Someone could certainly say that... but judges aren't idiots. I'd like to hear of one case successfully argued in court on that basis.

Thrugelmir wrote: »

The logic is that Santander (as in Residential Mortgages)aren't in the market for your business.

And my point is simple. I'm not asking them to lend money to a business. I'm asking them to lend money to me personally as an individual. I have assets and income (from employment totally unconnected with this venture) that is well able to cover the loan, it won't even be pushing close to affordability limits and the LTV will be under 60%.

The utter stupidity I see in this is that if I'd said I wanted to buy a Porsche, they'd probably have been fine with it. How does this make sense?

As it is, another of the investors had the same problem with his lender. So instead of forming a company to buy the flats we intend to renovate together, we've decided to buy them individually and cooperate on the renovation. Of course, that's going to mean we can only buy 3 instead of 4 and will also result in higher tax bills for everyone, but there you go.