Mortgage Redemption Penalty

colinmitch

I am writing in the hope you can help me, my partner and I recently have split (amicably), and I have agreed to buy her out of the house we are living in, therefore needing to borrow more money

My mortgage company Mortgage PLC have a redemption penalty as stated below, and after various phone calls, they are not willing to compromise, even though I have had the mortgage for 2 years and have always paid promptly.

Early repayment charge is 6% of outstanding mortgage = £6,427.20
Plus Admin fee = £ 191.00
Total to pay = £6,618.20

Which after talking to the office of fair trading they have informed me this is OK, (albeit the maximum permissible penalties.)
My contract also states that the mortgage is portable, but Mortgage PLC part of the Merrill Lynch group, USA, no longer provide new mortgages, I therefore have no way of raising the extra cash with them, so as to avoid these charges.

I understand I have signed this contract, but as Mortgage PLC have also changed there status as a mortgage provider, why should I still be liable for such huge penalties.

Berkshiregirl

ERC payments form part of the contract as you acknowledge and aren't something the bank will negotiate on - there's nothing in it for them. If the ERCs had been lower you probably would have been on a higher rate - they form part of the cost of borrowing the money.

Equally, I suspect you'll find the portable nature is only if it meet their requirements at the time you put in your request - and if they're not loaning any more money then it won't be possible. I've not heard of a mortgage contract where you have the right to port, only that you can request it and they'll consider it.

I know I sound negative, but there's really nothing you'll be able to do as they're both terms of the contract you signed.

dunstonh

I understand I have signed this contract, but as Mortgage PLC have also changed there status as a mortgage provider, why should I still be liable for such huge penalties.

You were happy to take on the terms of the mortgage then you have to face the consequences. You didnt need to tie yourself in but you made that choice. Typically its to save money over the term of the deal. Thats how it works.

The lender finances that deal by borrowing the money itself and it gets tied into arrangements as well which can see it being faced with charges if it wants to pay it back early.

The charge is fair and legal and understandable.

blueberrypie

colinmitch wrote: »

I understand I have signed this contract, but as Mortgage PLC have also changed there status as a mortgage provider, why should I still be liable for such huge penalties.

If the change in the lender's status made the early repayment charge clause of the contract void, it would also make the rest of the contract void - leaving you in the position of needing to find the funds to pay them the full amount you owe.

Gorgeous_George

Do not be hoodwinked. There is usually someone else involved. If she wants out, sell up and split the profit or loss now. You will be free to buy again and will only be paying half of the exit penalty.

If you still want to raise more money, you could use another provider if there is some equity in te property.

GG

happybroker

have you considered a 2nd charge loan? The rate will be much higher but depending on the amount you need to raise it may make sense.

Try and get some advice from a good broker who will be prepared to go through the credit agreement with you and help you to look at your other options so that you can be sure that it makes financial sense.

_Andy_

colinmitch wrote: »

why should I still be liable for such huge penalties.

Because

colinmitch wrote: »

I understand I have signed this contract

It's an unfortunate situation but MPLC won't reduce the ERCs nor should they.
Regarding the portability it's not something that's ever guaranteed even if the lender is still doing new business.

Matt1982

Unfortunately you will have to pay the ERC still. You are correct that MPLC are no longer lending however they are still processing their current mortgages and havent changed anything there.

I agree with happybroker and a secured loan may be you best plan of action. Depending on your circumstances you may be able to borrow the money you need and not have to pay MPLC erc's. Then when you erc's have expired you can pay off both the mortgage and secured loan (depending upon circumstances at the time).

Alternatively when do your erc's drop off...can your ex wait until then?