Incorrect mortgage advice from bank?

Franny_Stoakes

I own my UK house outright. It's worth about £500k. I've just bought a small property in Spain, for £100k. I borrowed the money for the Spanish property from a relative (the apartment needed snapping up, so it was quicker that way). I recently went to my bank to try to take out a mortgage on my UK property (which has no mortgage), so that I could pay my relative off. I earn well over the threshold to take out a mortgage for this amount.
My bank manager said no, in no uncertain terms. He said that due to the debt to my relative (even though it's informal, and not secured against anything), the FCA regulations prevent them from giving me a mortgage.
I don't understand how this can be the case. I've got plenty of equity, a well paid job and an excellent credit score. Why would this debt be seen as any different from a mortgage (if I had a £100k mortgage with another bank, they would more than willing let me move it to my bank).
He said he would have given me the mortgage if I had said it was for home improvements, but that now I had mentioned to was to pay a relative back, it was game over.
So, I have three questions:
1. Is this correct, or have they got their facts wrong?
2. Will I be 'marked' as having been refused a mortgage (I didn't fill in any forms, but it was a meeting with the mortgage person at the bank), and therefore will I be blocked if I go elsewhere?
3. Will my credit rating be affected?
I'd be really grateful for any pointers. I need to pay my relative back, but in order to do so I need to mortgage my UK property.
Many thanks
Franny

amnblog

Lenders can be tricky on valid reasons to raise funds against a residential property.

You are not marked refused.

Your credit scored is unaffected.

Consult a Broker.

Franny_Stoakes

That is a huge relief to hear, thank you. I will go to a broker then

amnblog

As an example

Here is the view of just one Lender

Loans can be used for non-home improvement purposes, or a combination of home improvements and non-home improvements, up to 90% LTV only.

Buy land and/or property separate from security - current property*

Repay unsecured debts (up to 80% LTV)

Other personal consumption

Pay off second charge (up to 80% LTV if not Help to Buy)

Buy out partner's interest (non-borrower)

Franny_Stoakes

I have one more question I was hoping you could help me with amnblog. The bank manager told me that they were prevented to giving me a mortgage to pay off a debt because of the FCA. Is this incorrect?

amnblog

No it is not.

ACG

Is it Santander?
They have a habit of assuming debt will not be cleared even if it will be.

There are one or 2 other lenders who do something similar but the majority will ignore debt that is being cleared and I am sure you will be fine with 90% of other lenders.

Franny_Stoakes

It is indeed Santander! Thank you, I'll keep my fingers crossed that another lender is more understanding.

ACG

Franny_Stoakes wrote: »

It is indeed Santander! Thank you, I'll keep my fingers crossed that another lender is more understanding.

We (brokers) know our stuff. If your struggling, it rarely hurts to speak to one as they can help you to avoid the lenders who are unlikely to lend to you. On the face of it, relatively straight forward situation, but in practice it is the little things that can catch you out and kill a case dead in its tracks.