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Santander updates lending criteria for self-employed

Christina Hoghton
Written By:
Christina Hoghton

Lenders are being more cautious about how they assess the income of self-employed borrowers in light of the financial fallout of the pandemic

Santander has changed its terms around when it considers a self-employed applicant’s income to be “adversely affected” by the Covid-19 pandemic.

A self-employed applicant will fall under this definition if their business is not currently trading or has been re-opened for less than three months.

It will also apply if they have taken a Self-Employment Income Support Scheme (SEISS) grant or if a limited company has received a Job Retention Scheme (JRS) grant. Those who have taken a bounce-back, BBIL or CBIL loans in the 12 months prior to the date of application will also be deemed adversely affected by the health crisis.

They will be considered impacted if their staff have previously been furloughed due to business trading conditions in the 12 months before the date of application.

More information required

Those borrowers falling under the new definition will be subject to additional evidence requirements such as how business turnover and income has been affected and confirmation of outstanding Covid-19 liabilities.

All self-employed mortgage applications are still limited to 75 per cent of the property’s value (LTV).

Santander also confirmed the cut-off date to submit self-employed income evidence for 2019/2020, overlooking the impact of the pandemic on finances, would be 6 October.

The bank introduced this policy in April and reiterated that the most recent year-end for self-employed income must not be more than 18 months before the date of the application.

Furloughed borrowers

If you’ve been on furlough, the lender will need income evidence to show you have returned to work.

If your latest payslip shows any furlough income, Santander will be unable to use this to assess mortgage affordability.