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  • FIRST POST
    • msallen
    • By msallen 19th Aug 19, 7:10 AM
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    msallen
    Converting to interest only mortgage (Santander / Alliance & Leicester))
    • #1
    • 19th Aug 19, 7:10 AM
    Converting to interest only mortgage (Santander / Alliance & Leicester)) 19th Aug 19 at 7:10 AM
    Hi all

    I have a mortgage with Santander (its actually an old Alliance & Leicester one), and would like to convert it to interest only - at least for a couple of years.

    Following a recent redundancy and then cancer diagnosis I have decided to completely change my life and so have signed up for a post-grad course (lasting about 20 months) which starts next month.

    I could possibly just about survive to the end of it from savings, but it will be very tight indeed, so I am looking at ways of reducing outgoings.

    The largest of these is my mortgage of course, and about 80-90% of the payment is capital, so it would be ideal if I could amend this to interest only - even if only for the duration of the course.

    I'm about 17 years through a 25 year mortgage, and have never missed a payment, or indeed had any issues with Santander (and am one of the "old Select" account holders).

    Given the above can anyone advise whether this is even feasible, or when I tell Santander that I no longer have an income will it have a detrimental effect on my relationship them. (I couldn't care less if they stripped me of "Select" status though)

    If it is feasible, has anyone done this before (or does anyone work for Santander) who can share their experience, how they went about it, and anything else you think I need to consider (for example I pay a pretty decent interest rate now - 0.99 above base - would this likely increase or remain the same).

    Thanks
Page 1
    • csgohan4
    • By csgohan4 19th Aug 19, 7:16 AM
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    csgohan4
    • #2
    • 19th Aug 19, 7:16 AM
    • #2
    • 19th Aug 19, 7:16 AM
    Ask Santander, they are obliged to at least consider your hardship, but even if you got interest only, it won't be for long


    You may be able to get payment holiday as another option, but that would just be added to the mortgage and only temporary and shorter


    Btw Select status is a gimmick, Santander tried to entice me from leaving the select account by saying you will lose your gold coloured card, how lame.
    Last edited by csgohan4; 19-08-2019 at 3:44 PM.
    "It is prudent when shopping for something important, not to limit yourself to Pound land/Estate Agents"
    • msallen
    • By msallen 19th Aug 19, 9:23 AM
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    msallen
    • #3
    • 19th Aug 19, 9:23 AM
    • #3
    • 19th Aug 19, 9:23 AM
    Thanks csgohan4. Its not a "payment holiday" I am after though, its to convert to an interest only mortgage, which of course is a perfectly valid mortgage type in its own right, not just something they offer to people in hardship for a short period. Is this likely to be possible anyone? If not I'd rather not inform them I currently have no income.

    (Also I don't have a Select account. That's what I meant by "old Select" - it was originally a 'status' attached to the customer rather than an account type. I've commented on here before how worthless it is - to me at least.)
    • AnotherJoe
    • By AnotherJoe 19th Aug 19, 9:34 AM
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    AnotherJoe
    • #4
    • 19th Aug 19, 9:34 AM
    • #4
    • 19th Aug 19, 9:34 AM
    I suggest you say that due to medical treatment you will have reduced income and are looking to go IO only for a couple of years. That may assist them in keeping you on the current interest rate.



    If you just said you wanted to go IO only they may well treat that as a new deal and give you a much worse rate which will negate much of the benefit of going IO.
    • msallen
    • By msallen 19th Aug 19, 9:44 AM
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    msallen
    • #5
    • 19th Aug 19, 9:44 AM
    • #5
    • 19th Aug 19, 9:44 AM
    Thanks AnotherJoe. It may come down to that. However as I can't get into a branch until Wednesday or Thursday, I'll hold off and see if anyone who has done this (or works for them) adds any first hand experience before then.
    • MortgageMamma
    • By MortgageMamma 19th Aug 19, 11:04 AM
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    MortgageMamma
    • #6
    • 19th Aug 19, 11:04 AM
    • #6
    • 19th Aug 19, 11:04 AM
    Santander Lending Criteria

    We allow interest only applications provided there is an acceptable
    source of funds to repay the capital at the end of the mortgage.
    For new customers and existing borrowers who are increasing the
    interest only amount:
    Where any part of the mortgage is on interest only, and the
    combined gross income is less than 100,000, the maximum
    income multiple is 4.45 times income. Income may be a
    combination of primary and secondary incomes and proof of
    income must be evidenced.
    Where any part of the mortgage is on an interest only basis the
    maximum LTV for the overall lending is 85%. Where at least one
    applicant has a gross income of more than 250k, any lending
    over 75% LTV must be on a capital and interest basis. For an
    applicant with gross income of 250k or less, any lending over
    50% LTV must be on a capital and interest basis.
    I am a Mortgage Adviser

    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • msallen
    • By msallen 19th Aug 19, 12:20 PM
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    msallen
    • #7
    • 19th Aug 19, 12:20 PM
    • #7
    • 19th Aug 19, 12:20 PM
    Thanks MortgageMamma. Funds to pay the capital at the end isn't an issue - I can use the 25% Tax Free part of my pension(s), which I can access in just under 3 years if needs be.

    However I still have the issue of zero income for the next 2 years, which I don't know how they'll react to.

    I guess I'm just going to have to decide whether to run my savings right down to zero over the next couple of years or to inform Santander of my situation and hope that it doesn't lead to unintended consequences.
    • MortgageMamma
    • By MortgageMamma 19th Aug 19, 12:25 PM
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    MortgageMamma
    • #8
    • 19th Aug 19, 12:25 PM
    • #8
    • 19th Aug 19, 12:25 PM
    Will you have any income at all? even student finance?

    You can easily talk through your options with them without committing to anything, call them up with a "what if" scenario and see what they say
    I am a Mortgage Adviser

    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • msallen
    • By msallen 19th Aug 19, 12:43 PM
    • 1,084 Posts
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    msallen
    • #9
    • 19th Aug 19, 12:43 PM
    • #9
    • 19th Aug 19, 12:43 PM
    Yes I have taken out a Student Masters Loan, but its only for about 2.5K more than the cost of the course. (a little under 11k against a little over 8K)

    If they count that as income then that will probably help a little, but I wouldn't have expected them to.
    • csgohan4
    • By csgohan4 19th Aug 19, 3:46 PM
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    csgohan4
    For those reading in future, you should consider income protection when your relatively healthy to have a better deal than later on in life, when you have a medical history making it more difficult find cover




    May have been useful in this case, even if it pays out for 3 years before retirement
    "It is prudent when shopping for something important, not to limit yourself to Pound land/Estate Agents"
    • Thrugelmir
    • By Thrugelmir 19th Aug 19, 4:01 PM
    • 64,960 Posts
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    Thrugelmir
    However I still have the issue of zero income for the next 2 years, which I don't know how they'll react to.
    Originally posted by msallen
    Lenders are highly regulated now. Internal policy will be such that they won't enter into an arrangement where the customer is put at "financial risk". As they themselves could be found culpable if matters take a turn for the worst. Their decision can only be based on today's facts not what might happen.

    Speak to the lender. As options might be available.
    If the financial system has a defect, it is that it reflects and magnifies what we human beings are like. Money amplifies our tendency to overreact, to swing from exuberance when things are going well to deep depression when they go wrong. Booms and busts are products, at root, of our emotional volatility.
    ― Niall Ferguson
    • zagubov
    • By zagubov 19th Aug 19, 6:40 PM
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    zagubov
    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.
    There is no honour to be had in not knowing a thing that can be known - Danny Baker
    • msallen
    • By msallen 19th Aug 19, 7:33 PM
    • 1,084 Posts
    • 1,359 Thanks
    msallen
    Lenders are highly regulated now....
    Originally posted by Thrugelmir
    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...
    Originally posted by zagubov
    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
    • By zagubov 19th Aug 19, 9:19 PM
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    zagubov
    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
    There is no honour to be had in not knowing a thing that can be known - Danny Baker
    • Donnie2019
    • By Donnie2019 20th Aug 19, 7:04 AM
    • 11 Posts
    • 1 Thanks
    Donnie2019
    Santander - anything goes!
    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 Its slways worth asking. They seem very flexible .
    • msallen
    • By msallen 21st Aug 19, 10:23 AM
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    msallen
    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.
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