Santander extra borrowing - extra picky?

dansylvester

Hi, just wanted to run this by the forum, see if this seems sensible to those with more knowledge than us. 

We currently have a mortgage of £72k, on a home worth roughly £160k - and are 18 months into a 5 year fix with Santander at 3% (Lucky we re-mortgaged when we did!). We have around 18 years left on the mortgage, and are 40. Our monthly payment is £440, and we overpay around £100 a month to reduce our term

Our family is growing older, so we have been looking into extending our home to give us an extra living space, and a home office, which is currently our box room - so our 2 children no longer have to share a bedroom, so approached our lender Santander, to ask about some additional borrowing. Going through the start of the process, we were looking to borrow £40k, enough for an extension, and a bit of refurbishing works, and a bit of buffer in case anything cropped up with the extension. The online calculator suggested we could maybe borrow up to £56k.

We have a household income of around £50k, so felt that borrowing in total £112k was affordable, as only just over 2 times our annual income. Initial process went fine, and passed affordability checks - until the mortgage advisor looked at the application, and advised that some of my wifes earnings were unable to be taken into account as she is paid in cash. All above board, but some of her income is from a small (old school) business, and so £75 a week wouldn't count. This, apparently, reduced the amount we could borrow down to £14k. We could borrow up to £24k, but only if we extended our term from 18 years to 28 years, to our retirement age.  

We then looked to go for a smaller amount, and not extend, but get a garden room instead, and still do the other works - which would come to around £20-23k-ish. We called back and confirmed we would want to go ahead, and extend to 28 years. Our monthly payment would stay the same, pretty much - so we would continue to overpay, so that eventually our term would come down to 15 years anyway - thats the plan anyway!

Couple of ours later - we had another call. I have a credit card, which I put all our spending on with Santander, for the cashback. The calculators, and all other discussion said because it is paid in full on direct debit every month, and has been for over 10 years - this wouldn't count as a debt - but now apparently it does, so the balance of £800 on the last statement is now counted as a debt - reducing the amount we could borrow to £21k. 

Does this seem correct to anyone with more knowledge of these things?

What Santander are basically saying, is with a household income of £50k, we could only have a mortgage for £93k - just 1.85x annual salary, and only then over 28 years?? 

We both have good credit ratings, never missed a payment, no debt (and never have been in debt, other than a student overdraft when I was 20) other than a car loan at £200 a month, and banked with santander for over 15 years. 

Feels like we are just reluctant to lend to us for some reason?

Hoenir

Would appear that your verifiable income is somewhat lower than £50k. If it's above board then "cash" is just is a means of payment nothing more. 

While your current mortgage interest rate is 3%. Santander will using a much higher level to stress test your finances. 

Credit cards are cleared in arrears. Normally from the following months pay cheque. By deducting this, it allows for the unexpected event that befalls many borrowers and impacts them financially. 

In essence Santander is undertaking it's regulatory duty to lend responsibly. Nothing personal directed at you. Just board level company mortgage lending policy.  

dansylvester

Which is fine, I don't expect Im being treated differently for any reason, nor do I expect anything to change - it is what it is - I just wasn't sure if it was the new normal - or Santander were particularly strict on their criteria. 

Even discounting my wifes role paid in cash (which is all above board - evidenced by wage slips etc, just payment isn't made into a bank account directly by the employer) - Were still at £46k a year household income, or around £3100 a month net. To say we can only afford £450 a month seems low - even if we account for interest rate jumping to 8% when the term ends in 2027, and our payments were to double to £900, were still left with around £2000 a month, even after the car loan is taken out, which ends before the fix term ends anyway. Essentially were being limited to 2x annual income

The credit card thing - on the website, and confirmed when going through the affordability was confirmed that "Don’t include credit cards that have been repaid in full each month for the last 6 months." - We basically just put all our food and petrol on a cashback card - yes we owe £800, but we'd still pay that money out anyway, and those costs are accounted for the affordability already. To take a further £3k off the amount we could borrow doesn't seem right. We'd have enough savings to pay this off, we literally just do it for the £6 a month cashback, which they encouraged us to do when I took the card out many years ago, albiet when the terms were far more generous. 

Im guessing this is just the new normal for lending?

ReadySteadyPop

Yes, the old normal wasn`t really "normal" by historical standards, more an experiment which is starting to go wrong.

Santander are also raising borrowing costs.

https://www.msn.com/en-us/money/realestate/santander-raises-mortgage-rates-for-second-time-in-four-days/ar-AA1o1J2T