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perhaps this is a silly question about ERC's
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cal1_2
Posts: 103 Forumite
Hi Everyone
Sorry if this is a silly question. I have 15 years left to go on my mortgage. I have just completed on a 10 year fixed rate mortgage with the following ERC's:-
Early repayment charges
If you repay your mortgage in full or part by capital repayment, or transfer to another product within the periods shown, the following early repayment charge will apply. This will be calculated as a percentage of the amount that you repay early.
10 Year Fixed Rate
Year 1 - 8%
Year 2 - 8%
Year 3 - 8%
Year 4 - 6%
Year 5 - 6%
Year 6 - 6%
Year 7 - 5%
Year 8 - 5%
Year 9 - 5%
Year 10 - 3%
However, when I completed on this mortgage, it says on the paper work I received "you may make overpayments of £499.99 each month on your mortgage without incurring an ERC"
So, my silly question is, for arguments sake, say I was to overpay by £400 per month, my calculator says I will reduce the term from 15 years to 6yrs 2months. So what will happen in (just over) 6 years time. Have I finished paying my mortgage and wont pay any ERC's?
Sorry if I am acting a bit dim:o
Thanks all:A
Sorry if this is a silly question. I have 15 years left to go on my mortgage. I have just completed on a 10 year fixed rate mortgage with the following ERC's:-
Early repayment charges
If you repay your mortgage in full or part by capital repayment, or transfer to another product within the periods shown, the following early repayment charge will apply. This will be calculated as a percentage of the amount that you repay early.
10 Year Fixed Rate
Year 1 - 8%
Year 2 - 8%
Year 3 - 8%
Year 4 - 6%
Year 5 - 6%
Year 6 - 6%
Year 7 - 5%
Year 8 - 5%
Year 9 - 5%
Year 10 - 3%
However, when I completed on this mortgage, it says on the paper work I received "you may make overpayments of £499.99 each month on your mortgage without incurring an ERC"
So, my silly question is, for arguments sake, say I was to overpay by £400 per month, my calculator says I will reduce the term from 15 years to 6yrs 2months. So what will happen in (just over) 6 years time. Have I finished paying my mortgage and wont pay any ERC's?
Sorry if I am acting a bit dim:o
Thanks all:A
0
Comments
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You pay the ERC on the outstanding balanceI am a Mortgage Adviser
You should note that this site doesn't check my status as a Mortgage Adviser, 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.0 -
Hi
Thanks for your input. My mortgage is £50K over 15 years. I can overpay £500 monthly without incurring ERC's. If I overpay by £400 per month, I reduce the term from 15 years to 6.2. So there won't be any outstanding balance, i'll have paid it all off.
Do I just ignore
Year 1 - 8%
Year 2 - 8%
Year 3 - 8%
Year 4 - 6%
Year 5 - 6%
Year 6 - 6%
Year 7 - 5%
Year 8 - 5%
Year 9 - 5%
Year 10 - 3%
I'm sorry i'm being thick - I think the paper work contradicts itself - so i'm still not sure0 -
So if you have whittled your balance slowly down the account will naturally redeem, they can't apply an ERC to a nil balance.
Is there an exit fee or closure fee or whatever else they may want to call it?
You are not being thick lol! The paperwork doesn't contradict itself the percentages would be charged if you went elsewhere and remortgaged etc, or suddenly came into money and tried to pay the whole balance off etc.
You might find that they contact you when the balance is looking like it is going to naturally redeem and charge you a small penalty but it will be neglible by then as you will have whittled the balance down. The penalty is paid on whatever the outstanding balance is at the time. Just look out for them exit fees!I am a Mortgage Adviser
You should note that this site doesn't check my status as a Mortgage Adviser, 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.0 -
Thank you Mrs Bumble:A
I've just had a look through my mortgage offer and think I get it now, thanks to you! The ERC's wont apply as long as I dont overpay by £499 per month. There is, indeed, a discharge fee of £125 max if I redeem before the due date.
Thanks for your help in this matter, much appreciated!
x0 -
Win! Win!
Good luck:)
I am a Mortgage Adviser
You should note that this site doesn't check my status as a Mortgage Adviser, 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.0
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