Save 000's when closing flexible mortgage early

stockportshire

I'm selling my house and although the mortgage is portable, with the market being what it is in London just now we might need to go into rented for a bit while we look for our next place.

Alliance & Leicester were going to charge a "fine" of over 2,000 to terminate the mortgage early as we're still within the initial discount period. Fair enough as that's what I agreed at the outset, but I've discovered there's a way around this.

Because it's a flexible mortgage you can overpay as much as you like as long as you leave at least 500 quid outstanding. But the "fine" is calculated as 3% of the outstanding amount including overpayments! So if you can find enough capital for just a few days, you can overpay all but the 500 quid immediately before closing the mortgage account. Then you just pay the fine on just 3% of 500 quid... which is the princely sum of 15 pounds!!! When the proceeds from selling the house are available the capital can then be repaid. Even if it costs money to borrow the capital you're probably still quids in.

Apologies if this is old hat to you moneysavers, I was just dead pleased with it!

homer_j_3

Yes this idea is not new and I am glad you thought to post here.

The reality of the problem is that you need to find the cash to do this and I do not know many people that would loan me enough to repay my mortgage bar 500 without an agreement or some benefit of doing so.

payless

and remember some lenders will base penalty on original balance / products will this overpayment option will often come at a small premium... but loopholes do sometimes exist