Converting to interest only mortgage (Santander / Alliance & Leicester))

zagubov · 19 August 2019 at 7:40PM

If you're planning to switch from a repayment to an interest-only loan, that might be a big enough change to trigger a credit check.

It used to be the case that it wouldn't need a credit check but things have tightened up a lot nowadays, as those adverts asking if we've been mis-sold financial products keep reminding us.

msallen · 19 August 2019 at 8:33PM

Thrugelmir wrote: »

Lenders are highly regulated now....

zagubov wrote: »

If you're planning to switch from a repayment to an interest-only loan, that might be a big enough change to trigger a credit check...

This is what concerns me, and makes me wonder whether I might be better off exhausting all my savings instead ... although ... if they were to credit check me and fail the application to switch, then I guess that wouldn't affect my current mortgage would it? I mean they can't do anything about that as long as I keep up the payments on it?

The more I think about it, it seems all they could do is remove my Select status and my overdraft - neither of which would be an issue. However the removal of my overdraft would appear on my credit report, and this might spook other lenders. I had intended to keep all my credit cards open as a fall back in case the savings don't last quite long enough, or in case I need to cover a few months more expenses before I start earning again after the course ends.

zagubov · 19 August 2019 at 10:19PM

It wouldn't affect your current mortgage. Even if they can't offer you the interest-only version which might cost you less, and therefore would obviously be more affordable, why would they withdraw your current mortgage as long as you continue to pay it? We went through a re-mortgage request in similar-ish circumstances and there was never a question of them pulling the existing mortgage.

I don't see them withdrawing your overdraft. Your credit card companies shouldn't withdraw your credit either, although that would be a very expensive and non-MSE way of obtaining funds

Donnie2019 · 20 August 2019 at 8:04AM

Hi. I have good experience with Santander so I hope u do too. I found them very obliging. Having interest only mortgage and need to make money turned house into commercial bed and breakfast, using air bnb and booking .com. Other people with other banks have had to stop bnb but Santander lets this happen on a residential interest only mortgage It’s slways worth asking. They seem very flexible .

msallen · 21 August 2019 at 11:23AM

Update for the sake of anyone finding this thread in future....

I spoke to Santander and they will only allow the change to interest only if you have an "approved" means of funding the capital repayment, such as an endowment policy, and the tax free 25% from my pension(s) isn't an "approved" means apparently.

The other option offered was to sign a document to promise to sell the property to repay the capital at the end of the mortgage if you are unable to do so by other means. I said I was happy to do that, even though in reality I would be using my pension, but then found that this was not acceptable because that requires having a minimum of £150K equity, whereas my equity (house value less mortgage outstanding) is only £126K.

Converting to interest only mortgage (Santander / Alliance & Leicester))

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