Help Getting Out Of A Fixed Rate Mortgage

samizdat

swisstoni wrote: »

Hi All,
[...]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. [...]
Tony

Tony, These days some lenders might be pretty grateful to have a mortgage redeemed because it improves the cash flow of their business. Therefore, it might be worth making an offer to your lender to redeem the mortgage early if they will waive the penalty charge.

As I have argued before on these forums, ERCs on fixed rate mortgages are not well designed, mainly as a result of regulatory failure. There should be an option for people to accept mark to market charges on early redemption, which these days would mean no charge would be due on the vast majority of current mortgages of this type. The fact is that although people do of course sign up to these charges, many people do not understand the implications. Particularly in the two and three-year fixed rate segment, ERCs often seem disproportionate when you consider the likely outcomes for lenders in different interest-rate environments.

Also, there is nothing wrong with trying to get out of penalty charges that you have signed up to. You have a contractual problem and you are seeking to mitigate your costs by negotiation. There is no moral issue here.

Ian_Griffiths_Halifax

And the lender has you by the short and curlies. A contract is a contract so long as it is legally binding.

It's up to the lender as to whether or not you will get out of the penalty and with the exception of Edeus/Oakwood on their Buy to Let deals, I've not come across any lenders waiving penalties unless you die.

No harm in asking though!

DUFFIELD_3

hi
when you say oakwood do you mean oakwood homeloans?
i have a mortgage with them and did not realise that once i clear my mortgage i have to pay them 5% of the value i borrwed from them.
is their any way i can get out of this?
i thought this would go after my fixed rate for 2 years but i have been informed that it is for the lifetime of my mortgage.

thanks in advance

regards

alan

Ian_Griffiths_Halifax wrote: »

And the lender has you by the short and curlies. A contract is a contract so long as it is legally binding.

It's up to the lender as to whether or not you will get out of the penalty and with the exception of Edeus/Oakwood on their Buy to Let deals, I've not come across any lenders waiving penalties unless you die.

No harm in asking though!

Ian_Griffiths_Halifax

Alan, I've PM'd you back, but as I've said in the PM, it's very very rare to have a 5% penalty for the term of the mortgage, though I have seen it before - years ago.

Call them and see if they will waive it if you move but check the Offer Letter again and you may find it's not as bad as you think.

I never did any Edeus/Oakwood Buy to Let mortgages, so I couldn't tell you it it was common on their mortgages or not, though I'd guess not.