Help Getting Out Of A Fixed Rate Mortgage

swisstoni

Hi All,
Had a quick search and can't seem to find anything relating to this subject, so sorry if it's been covered elsewhere.

Basically, my story is that myself and my partner are seperating and have a fixed rate mortgage that expires in June 2009. We wish to sell our house to divide funds, however been told by our mortgage company that it would cost a whopping £7000 in penalties to do this before the fixed rate expiry date. The remaining mortgage payments between now and then don't add up to this. Is this correct and is there anything we can do about it? Neither of us can afford to move out until we have the funds from the house sale.
Our mortgage lender is a sub-prime lender due to financial circumstances from the past, so we are already paying "over the odds" so to speak.

Any help would be greatfully appreciated.

Tony

dunstonh

Is this correct and is there anything we can do about it?

It is correct and there is nothing you can do about it. The charge is fair and legal.

Fixed rate mortgages have largely been funded by investors. Those investors would have to be paid regardless of whether you redeem the mortgage or not so the lenders build in a penalty period to protect themselves from having to foot the bill if you choose to repay the mortgage early. It is one of the risks of buying a mortgage on a special deal but most accept the risk to get the benefits of the deal.

_Andy_

Tony - the early repayment charges would have been on your original KFI (key facts illustration) and mortgage offer.

As dunstonh has said these are totally legal.

FraudBuster

It is very simple.
You agreed a contract.
The penalty for breaking that contract is £7,000.
Caveat Emptor.

koexelek

Is there any mileage in either or both of you taking out your new mortgages with the same lender ?

If so, it might be that they would "port " the product to the new property/ties and you would avoid paying penalties ( or at least lesten them)

This would definitely work in the prime market, but some sub prime lenders can be a bit funny

sarkin

I think your biggest problem is selling the house, you may find you have not completed by next June.

0james0

Or do either of you fancy staying in the house and buying the other out? The lender would almost def let you capital raise as an additional borrowing whilst keeping the existing mortage intact. Depends on the equity you have and if one of you could afford the mortgage in your own right.

Or depending on what you are buying porting the mortgage is always a good way around although check on the lender t&c's about taking a name off of the mortgage as some, especially the adverse ones will still try charge ERC's.

You may find though that by the time you sell and then the buyer completes it will take you past June 2009 anyway. Sales are hard to come by and mortgages are taking longer to be offered. 9 months seems a long time but will soon fly by.

One last idea could be for you to rent your prop out for 6 months whilst both renting yourselves, just a short term fix until you are allowed to sell penatly free.

tinkerbell84

0james0 - how come you don't have to have the official 'mortgage adviser' signature then?

Ian_Griffiths_Halifax

Check your KFI as koexelek says, it may be that you can use the 'portability' option within the mortgage. That's if you can 'port' it as some sub-prime mortgages aren't portable.

koexelek

Ian_Griffiths_Halifax wrote: »

Check your KFI as koexelek says, it may be that you can use the 'portability' option within the mortgage. That's if you can 'port' it as some sub-prime mortgages aren't portable.

I know some of the sub prime lenders won't port the actual deal, but will waive the redemption penalty if the borrower is prepared to take out a new product with them for the same amount.

swisstoni

Hi again and thanks for all your replies,

the thing I can't get my head round is that my mortgage payments up to June next year would be about £5000 and yet they'd still want £7000 in penalties! I was told (by a financial advisor working for their company) that the penalties would be reduced as the length of the fixed rate term decreased however the company say that this is not the case! Another case of mis-selling to get a signature on a deal so Mr.Advisor gets his commission. And before some of you rant on about reading the small print, how many actually ever read the small print of every document you ever sign?

Tony