I desperately need some help after Santander declined our remortgage application. I have never earned more than I do now and business is booming. But our application has been refused because the company I part-own received two months’ furlough payments for an employee who had to reduce her hours because she could not get childcare.
Our case is slightly complicated in that I both part-own and am employed by the seven-person firm, so Santander wanted to see my business details as well as my personal income. Our application was refused because the company had had government help.
We received £3,664 to part-pay the affected employee’s wages – frankly, we didn’t need it but did so on the advice of our accountant to compensate for the loss of that one employee’s billable hours.
I had no idea it would mean I would be refused a mortgage. Not only that but now other mortgage companies will see the black mark, and potentially also refuse us.
Santander’s policy appears to be that it will not lend to self-employed people if the company has received government help in the past three months.
This seems utterly ridiculous. We have never missed a payment and can easily afford the modest increase to the mortgage, which will be used to build an extension that will add value to the home.
OS, by email
Since the pandemic hit, mortgage lenders have become a lot stricter about who they will lend to, and self-employed applicants are coming under particular scrutiny. They are asking for extra paperwork, and looking carefully at what, if any, government help businesses have needed.
That said, Santander’s mortgage department appears to have a problem applying a bit of common sense. Had you been an employee (rather than co-owner and employee) would it have asked for details of company finances? No.
If it is going to reject mortgage applications from company owners who paid staff with furlough help, that is going to be a lot of people, given firms across the UK signed up to the scheme that was actively promoted by the government.
It’s also frustrating as you acted in the best of interests of your staff. Had you simply told your colleague to take unpaid leave, none of this would have happened.
We pointed out all of this to Santander, and it has agreed to take another look at your case, with extra evidence of income and company finances. The bank says it asks for details of how businesses have been trading to assess the financial impact of Covid and ensure any borrowing remains affordable in the long term.
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