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    • jolester
    • By jolester 13th Feb 18, 2:50 PM
    • 183Posts
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    jolester
    Trying to calculate redemption penalty please
    • #1
    • 13th Feb 18, 2:50 PM
    Trying to calculate redemption penalty please 13th Feb 18 at 2:50 PM
    Hi

    I am likely to be changing my mortgage shortly and I am aware that I will incur a fee for closing this mortgage early, I am not sure exactly what the following means though and I'd really appreciate if someone could clarify for me as I'm trying to calculate exactly what the penalty will be. I have contacted my mortgage co for the figure but they will only send this is writing in 3-5 days and I could do with trying to work it out roughly before then !

    Early repayment charge

    From 1st October 2017 - 3.00% of the amount repaid, plus fees, plus cashback of £250. Cash example £6080.00


    Does the above mean that the redemption penalty is 3% of the amount that has already been paid (which isn't a lot) plus the £250 cashback incentive, plus a lot of fees which would make the redemption penalty £6080?

    Or, 3% of the amount outstanding mortgage which WOULD be repaid upon taking a mortgage out with a different lender?

    (I am assuming that the cash example is them telling me what I should expect the early repayment penalty to be?)

    Thanks for any help you can offer
Page 1
    • TonyMMM
    • By TonyMMM 13th Feb 18, 3:02 PM
    • 2,565 Posts
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    TonyMMM
    • #2
    • 13th Feb 18, 3:02 PM
    • #2
    • 13th Feb 18, 3:02 PM
    3% of the amount you are repaying early (i.e. the outstanding mortgage amount), + the fees etc.
    • getmore4less
    • By getmore4less 13th Feb 18, 3:05 PM
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    getmore4less
    • #3
    • 13th Feb 18, 3:05 PM
    • #3
    • 13th Feb 18, 3:05 PM
    The back question is why the need to change?
    • jolester
    • By jolester 13th Feb 18, 3:16 PM
    • 183 Posts
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    jolester
    • #4
    • 13th Feb 18, 3:16 PM
    • #4
    • 13th Feb 18, 3:16 PM
    The back question is why the need to change?
    Originally posted by getmore4less

    Hi,

    I have already been to my current mortgage lender about increasing funds to cover the new property being purchased, they would do this and my new monthly mortgage amount would be £2362.00, I have seen a mortgage advisor and they can get me the required mortgage amount with a different lender with a monthly payment of £1484.79
    • getmore4less
    • By getmore4less 13th Feb 18, 3:36 PM
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    getmore4less
    • #5
    • 13th Feb 18, 3:36 PM
    • #5
    • 13th Feb 18, 3:36 PM
    the monthly payment is not the critical bit of information to making the decision to change.

    It is easy to produce a lower payment by just increasing the term.

    What are the details of the 2 deals on offer. (amounts, rate. terms payment) don't forget to factor the fees and ERC.
    • amnblog
    • By amnblog 13th Feb 18, 3:50 PM
    • 10,286 Posts
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    amnblog
    • #6
    • 13th Feb 18, 3:50 PM
    • #6
    • 13th Feb 18, 3:50 PM
    Hi,

    I have already been to my current mortgage lender about increasing funds to cover the new property being purchased, they would do this and my new monthly mortgage amount would be £2362.00, I have seen a mortgage advisor and they can get me the required mortgage amount with a different lender with a monthly payment of £1484.79
    by jolester;
    Careful here. The difference on rate to save £878 pm on the payment without changing anything else would need to be 5% and that is not possible.

    You are not comparing like with like.

    Don't pay £6,000 in fees to make a saving that isn't a saving.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, 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.
    • jolester
    • By jolester 13th Feb 18, 3:53 PM
    • 183 Posts
    • 60 Thanks
    jolester
    • #7
    • 13th Feb 18, 3:53 PM
    • #7
    • 13th Feb 18, 3:53 PM
    the monthly payment is not the critical bit of information to making the decision to change.

    It is easy to produce a lower payment by just increasing the term.

    What are the details of the 2 deals on offer. (amounts, rate. terms payment) don't forget to factor the fees and ERC.
    Originally posted by getmore4less
    Thanks for your advice

    My current lender has openly admitted that their rate for additional borrowing is greatly higher than my current rate with them, their additional borrowing rate is 4.49% variable, for the same amount of borrowing over (edited from the same length of time) an additional three years I can get a far better fixed rate with a different lender
    Last edited by jolester; 13-02-2018 at 3:58 PM.
    • getmore4less
    • By getmore4less 13th Feb 18, 4:35 PM
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    getmore4less
    • #8
    • 13th Feb 18, 4:35 PM
    • #8
    • 13th Feb 18, 4:35 PM
    I would crunch the numbers to check.

    Could still be worth paying the higher rate till the ERC stops.
    • getmore4less
    • By getmore4less 13th Feb 18, 6:47 PM
    • 31,410 Posts
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    getmore4less
    • #9
    • 13th Feb 18, 6:47 PM
    • #9
    • 13th Feb 18, 6:47 PM
    The reason I say this is the broker should have done this and explained it to you.

    To do the numbers they would need to have estimated the ERC+ other costs to show you the savings.
    • amnblog
    • By amnblog 14th Feb 18, 7:56 AM
    • 10,286 Posts
    • 4,064 Thanks
    amnblog
    Thanks for your advice

    My current lender has openly admitted that their rate for additional borrowing is greatly higher than my current rate with them, their additional borrowing rate is 4.49% variable, for the same amount of borrowing over (edited from the same length of time) an additional three years I can get a far better fixed rate with a different lender
    by jolester;
    How much do you owe and how much extra are you borrowing.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, 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.
    • jolester
    • By jolester 14th Feb 18, 9:06 AM
    • 183 Posts
    • 60 Thanks
    jolester
    How much do you owe and how much extra are you borrowing.
    Originally posted by amnblog
    Good morning,

    I currently owe £181000, the new mortgage total will be £405000
    • getmore4less
    • By getmore4less 14th Feb 18, 10:20 AM
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    getmore4less
    What rates are the ported + new bit and the rate of the new mortgage?

    When does the ERC stop needing to be paid?

    LTV on the new place?

    edit:

    also when the deal with the cuurent lender runs out what are their retention deals like?
    Last edited by getmore4less; 14-02-2018 at 10:36 AM.
    • jolester
    • By jolester 14th Feb 18, 11:07 AM
    • 183 Posts
    • 60 Thanks
    jolester
    What rates are the ported + new bit and the rate of the new mortgage?

    When does the ERC stop needing to be paid?

    LTV on the new place?

    edit:

    also when the deal with the cuurent lender runs out what are their retention deals like?
    Originally posted by getmore4less
    The current fixed rate is 3.84%

    The new portion would be 4.49% variable for the additional £224000

    The ERC stops being in force on 30/09/2020

    LTV on new property is 85%
    • getmore4less
    • By getmore4less 14th Feb 18, 12:23 PM
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    getmore4less
    Average rate with current lender is 4.2% on the full £405k with a payment of £2,362 that's a term very close to 22y ish

    If the potential new mortgage is over 3 years more(25y) paying £1,485 suggests a rate of less than 0.8% which is unlikely for a 85% LTV.



    Are you sure the term is only 3 years more?


    What rate is the mortgage on offer, is it fixed, tracker, discount etc.
    • jolester
    • By jolester 14th Feb 18, 12:28 PM
    • 183 Posts
    • 60 Thanks
    jolester
    Average rate with current lender is 4.2% on the full £405k with a payment of £2,362 that's a term very close to 22y ish

    If the potential new mortgage is over 3 years more(25y) paying £1,485 suggests a rate of less than 0.8% which is unlikely for a 85% LTV.



    Are you sure the term is only 3 years more?


    What rate is the mortgage on offer, is it fixed, tracker, discount etc.
    Originally posted by getmore4less
    Sorry, old mortgage is 30 years, new mortgage 33 years
    • getmore4less
    • By getmore4less 14th Feb 18, 12:55 PM
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    getmore4less
    still does not add up.

    30/33 years

    1. £405k @ 4.2% 30y is £1980pm (not £2,362)
    2. £405k over 33y paying £1,485 is a rate of around 2.42%

    in sept 20 paying £1,980 on both you would owe
    1. £386,600
    2. £383,600

    that's not enough to cover a £6k bill.

    FULL details of the deals on offer would really help.
    • jolester
    • By jolester 14th Feb 18, 1:03 PM
    • 183 Posts
    • 60 Thanks
    jolester
    I've re-booked appointment with broker tomorrow evening as you're right that doesn't seem to add up, I've also called my current lender and asked them to put break down the information and put it in writing for me

    Thanks for the information you have provided
    • getmore4less
    • By getmore4less 14th Feb 18, 1:09 PM
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    getmore4less
    there may be other reasons a change is good even if it costs a bit more on the current numbers in the short term.

    one thing top look at is when will you drop LTV levels and the lenders sweet spots on rates.
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