Erp ?

bicolormoth

i have been trying to find a way of decreasing my monthly outgoings. the only way i have found up to now is to re-arrange my current mortgage deal with the same lender. they are offering me a consolidation loan, which means i can pay off my outstanding mortgage and some outstanding loans, this will save me almost £700 per month, in the short term, but in order to do so I will be 'charged' £5300 ERP , early repayment penalty for ending my 6yr fixed term agreement, and will have to pay another £699 to set up the new 2yr fixed agreement. as i certainly don't have £6000 to pay the penalty & fees , i have no option but to borrow the money as part of the consolidation. so i am overborrowing by £6000, but i have little choice as i simply cannot afford to pay everything in my current situation and will be homeless before long if things get any worse.
is the 'ERP' legal ?, do i have to pay it? can i claim it back? what should i do ?

michael1983l

Have you asked if your lender will come to an arrangment to reduce your payments. If you explain that you cannot afford your current repayments then they are encouraged by the government to try their best to help you out. If they do it this way then it will save you early penalty fee's. Most lenders will try to help.

bicolormoth

yes i did this about 10 mths ago, i ended up switching from repayment to interest only, but that means i am paying nothing off the mortgage itself, so in the last 12 mths i have not decreased the amount owed , just paid interest. to start paying the repayment again i would have to find an extra £260 per month, and i simply can't do that without going overdrawn, getting bamk charges etc. at least at the moment i can avoid being overdrawn, but i'm penniless and not paying anything off my mortgage. i have to do something about it. but i don't know if remortgageing is the best option. but saving £700 per month seems the right way to go. i would effectively be £440 better off per month than i am now. i just wondered if the ERP, ERC? was one of those that can be claimed back?

michael1983l

bicolormoth wrote: »

yes i did this about 10 mths ago, i ended up switching from repayment to interest only, but that means i am paying nothing off the mortgage itself, so in the last 12 mths i have not decreased the amount owed , just paid interest. to start paying the repayment again i would have to find an extra £260 per month, and i simply can't do that without going overdrawn, getting bamk charges etc. at least at the moment i can avoid being overdrawn, but i'm penniless and not paying anything off my mortgage. i have to do something about it. but i don't know if remortgageing is the best option. but saving £700 per month seems the right way to go. i would effectively be £440 better off per month than i am now. i just wondered if the ERP, ERC? was one of those that can be claimed back?

In my experience its the last resort to borrow your way out of debt. Have you considered selling up and moving to a cheaper property. Believe me the lower end of the market has just started to boom in the recent weeks I am looking myself. You can then take a lower mortgage and transfer your current one meaning no ERPs. Just an idea, but borrowing more to get out of debt does not seem like a good idea to me.

bicolormoth

i simply need to cut down what it is costing me to get through each month. a smaller house with a growing family isnt really an option.
is this erp / erc the same as a mortgage exit fee. ?

michael1983l

bicolormoth wrote: »

i simply need to cut down what it is costing me to get through each month. a smaller house with a growing family isnt really an option.
is this erp / erc the same as a mortgage exit fee. ?

In which case then you are not left with many options. I would seek the advice of a financial advisor if you do have to re-mortgage.

I don't know about those fee's sorry.

beecher

You have to pay the Early Repayment Charge to get out of your mortgage, and yes it is legal, yes you have to pay it and no you can't claim it back.

It is unwise to borrow the money to pay your ERC, particularly if you are only opting for a 2 year fix. Consolidating your debt isn't wise either. It sounds like you're not living within your means as it is so you need to tackle this rather than getting into more debt. Go onto the Debt Free Wannabee site for practical help, but selling up and downsizing/renting might well be your best option.