30 years of redemptions

campari

Hi - I've just discovered that my mortgage company has a redemption penalty applicable until the year 2030 !! Is this legal - I thought that the redemptions were usually for the first few years during the discounted period. In this case the first 3 yrs attract a 6 % penalty then 1% thereafter forever, however, the discount rates is reduced year on year in that first three years, so it appears there is no weighing one against the other. Does anyone know if this is an unfair agreement ??

TangentMan

We need to be clear about what you are referring to. If you are referring to an Early Repayment charge (historically known as a redemption penalty) then they are normally declared on the offer you signed and can last for as long as the lender wants. They can last for life, they can last for a preferential period and so on.

If on the other hand it is an adiminstration charge (such as a deeds admin fee, redemption admin charge, Final repayment charge) then these are probably stated and can probably vary but are more open to accusations of being unfair and are being contested since they are charges to cover work in winding up your mortgage and have, typically, gone up drastically in the last few year, possibly out of proportion to the work involved.

The fact you say you have only just discovered this might mean you have a case of arguing if they were not disclosed to you.

But otherwise if it is a genuine early redemption penalty / charge stated on your offer then it is just part of the contract you signed up to and, well, its fair.

campari

Hi thanks for that. Yes, it is the usual penalty for redeeming but my broker did specifically say that we should get out of the deal after three years max, I did not realise (stupidly) that the penalties still applied after that. I guess it's the same old thing - read the small print!