Mortgage Redemption & HUGE Fees

traz39

i have chance to deferr my mortgage interest for 6 months which means i will only be paying about half my monthly payments mortgage company said this will not effect my credit rating wondered if anyone has done this and know whether it does.:o

Robert_Sterling_3

Borrowed £153,409.00 ask for a settlement fee
They sent me a letter telling me they want the following

Outstanding Balance £167,133.08

Early repayment charge £9,234.83
This figure is very high indeed and I do not know how it can be so high. It is more than 5% of the outstanding balance.

Final payment £190.00
Interest up to & including redemption date £785.38


Current interest rate 8.44%
This interest rate is very high indeed.
Maybe you knew that this was the rate when you signed up for the mortgage.

Total amount to redeem £177,343,29
Additional daily Rate £38.65 which will be added each day until completion

Please can someone tell me why? We only borrowed £153,409.00 are arrears and charges added onto it.

If you have missed payments or made only partial payments then that has an adverse effect on the outstanding balance. There will also be penalties added to the outstanding balance.

It is an interest only mortgage.

As it is an interest only mortgage the outstanding balance does not ever go down but if you miss payments or make partial payments it will go up.

.................................................................................

There are three factors involved here.

1) An interest only mortgage
2) A very high mortgage rate
3) Underpayments.

The one good thing is that you appear to have capital appreciation as the value of the property has increased.

I wish I could help but all I am able to do is restate the facts.

dunstonh

The mortgage at 8% seems very high, especially as you have a £9k mortgage repayment charge.

Sounds sub-prime. In which case 8% is low. Probably a fixed rate arranged which would also explain the ERC.

Interest only = bad (with no repayment vehicle)
arrears = bad
paying your mortgage off during the tie in period = bad
suggestion it was sub-prime = bad (actually it doesnt by itself but when you go interest only and sub prime then its an accident waiting to happen)

astreix

Preferred was one of the Lehman brothers brand, specialising in sub-prime lending. So as other people have already pointed out, you most probably have subprime mortgage.

The rate of interest is not too much out of line with the subprime market. Also early redemption chrages were usually between 3 & 6 percent, which seems to tie in with what you have stated.

They would have made this very clear in the KFI' and since you agreed to the charges at the time of taking the mortgage, I can't see how you would avoid the early redemption charges.

However the early redemption charges are only applicable during the first couple of years into a mortgage. If you have only a very short time remaining on ERC, sometimes the lender will consider a partial waiver. Also most of preferred lending was linked to Libor which has come down in recent months and that should also reduce your daily interest.

kizzy23_2

it states on my KFI that the fixed period ends on 1st Sept 2010 after this date the fee drops to £1,534.09 it seems such a drastic difference. Is there any possiblity that this is negiotable?

I am just not in a position to keep the house any longer. Got into difficulties, yes i admit that for personal reasons. I just don't know what to do, someone suggested i would actually be better of getting it repossesed.

dunstonh

it states on my KFI that the fixed period ends on 1st Sept 2010 after this date the fee drops to £1,534.09 it seems such a drastic difference.

The lender was giving you special terms. If you exit early they suffer costs and that is why they pass that cost on to you.

Is there any possiblity that this is negiotable?

Normally no as the charge is fair and legal. However, if the lender thinks that its better to get rid of you they may waive it or reduce it.

someone suggested i would actually be better of getting it repossesed.

That would wreck your ability to get credit again for upto a decade (although that may not be a bad thing and your credit record is already hit). However, the lender can still come after you for the loss. You just exchange one hassle with another.

astreix

kizzy23 wrote: »

I just don't know what to do, someone suggested i would actually be better of getting it repossesed.

Not only will this wreck your credit record, but you will also incur all the charges which you have mentioned + repossesion costs. Often a repossessed property will sell for less than selling it yourself (this is arguable, but its my personal opinion), making things worse.

hence if you have equity in the property it would be much better to sell it yourself instead of going down the repossesion route.

Cazza

Kizzy repossession is not a good idea if there is any way around it. You're in a bit of a pickle already, which you know. Repossession adds another layer and the hangover will last years longer than the option your are going for at the moment. I certainly think that negotiating with the mortgage lender and the secured loan company should be your first course of action, but unless you know what you're doing I think it's a good idea for you to get someone to try to do the negotiating of your behalf, which is where the CAB come in.

In my opinion, you're doing the right thing already in selling the property, you just need someone with a little more experince who can properly go through the paperwork and help you negotiate the best possible outcome. If you have no money lest over for a deposit on a rented property, the CAB may be able to offer you guidance as to your options in this area too.

kizzy23_2

Thanks for all your help everyone I am going to get some legal advice tomorrow on where i stand and if there is any way i can waiver some of the fees. I just wanted to be able to pay off the loan as well and walk away debt free. to start again, because of their added costs i can't do that.

Yes i am in a mess i admit it but i am doing my best to rectify the situation and pay what i owe. Just feel like i am being penalized for doing the right thing. I work hard and still struggle, just seems if you scrounge of society you get more help its not right. Being honest and hardworking don't seem to benefit you in this country. Really feel so down about the whole thing

Cazza

Kizzy, you are doing the best possible thing in the circumstances and facing up to the situation, rather than burying your head in the sand, you have no reason to feel down about it because you're dealing with it! Go and have a chat with the people on the Debt Free Wannabe board and they'll all they'll you the same! Have a hug! :grouphug: X