Mortgage repayment fines

80schild

This is probably a long shot but I was wondering if there is anyway of contesting against the early repayment charges.
The thing is we have a mortgage with the company which used to be Northern rock and it is due for renewal in March.
We are about to complete on the sale of the house and therefore pay off this mortgage and begin a new one with a new company (The Nottingham).
Completion will be literally 6 weeks before the cut off for when the early repayment charges no longer apply. There is no way we can delay the sale any longer as our buyers are being kept waiting as it is by slow solicitors at the top of the chain!
My question is, is there anyway of contesting this charge.
It seems so unfair. I have never ever missed a mortgage payment or asked to defer and am raising all the negative equity that I am losing on the property myself with no bank loans (using inheritance money).

shortchanged_2

I very much doubt it. They were the terms you agreed to when you took out the mortgage, unfair as it may seem.

dunstonh

This is probably a long shot but I was wondering if there is anyway of contesting against the early repayment charges.

The charge is considered fair and legal.

It has been known to be waived in marginal cases but its not the norm. You can only ask.

It seems so unfair. I have never ever missed a mortgage payment or asked to defer and am raising all the negative equity that I am losing on the property myself with no bank loans (using inheritance money).

Its not unfair. You freely entered into an agreement that gave you special terms with a tie in for a period. You now want to exit early and need to face the consequences of it. A line in the sand has to be drawn somewhere with regards to the date.

DVardysShadow

dunstonh wrote: »

Its not unfair. You freely entered into an agreement that gave you special terms with a tie in for a period. You now want to exit early and need to face the consequences of it. A line in the sand has to be drawn somewhere with regards to the date.

I would agree, except that it would be unfair if the penalty charge were higher than the interest for the remaining period.

dunstonh

DVardysShadow wrote: »

I would agree, except that it would be unfair if the penalty charge were higher than the interest for the remaining period.

Not necessarily. If the cost to lender is higher than that, then it would not be unfair. The investors that have funded the mortgage lending may well have similar terms imposed on the lender.

With just 6 weeks to go you would expect some common sense but the staff at local level often do not have that level of discretion and you need to go further up the food chain to get someone that does have discretion. Indeed, that may be writing to their customer relations team who do have the discretion.

DVardysShadow

dunstonh wrote: »

Not necessarily. If the cost to lender is higher than that, then it would not be unfair. The investors that have funded the mortgage lending may well have similar terms imposed on the lender.

The cost to the lender cannot be higher than the interest over the remainder of the fixed term [unless they were lending at a loss - and if so, they would make that loss if there were no early redemption]. So I can only see that an early redemption fee which exceeds the interest to the end of the fixed term would in fact be a penalty charge.

Thrugelmir

DVardysShadow wrote: »

So I can only see that an early redemption fee which exceeds the interest to the end of the fixed term would in fact be a penalty charge.

The product would have been created and sold on the basis of the profit generated over the term of the fix. Selling a product involves upfront costs, ie marketing and salaries for example. So its simplistic to merely look at interest costs.

DVardysShadow

Thrugelmir wrote: »

The product would have been created and sold on the basis of the profit generated over the term of the fix. Selling a product involves upfront costs, ie marketing and salaries for example. So its simplistic to merely look at interest costs.

I think you are missing the context of this. If the loan is redeemed slightly early, but interest is paid in full to the end of the fixed term [at which point penalty charges do not apply], then all of these charges would be accounted for to the same extent as if the loan were carried to term.

Joe_Bloggs

@DVardysShadow
A very good point. However I am sure that it pays to have absolute penalties rather than have proportional penalties. I can remember when the Nationwide would consider the number of weeks left on a deal in calculating early repayment charges. The closer to the end of the deal then the closer to zero the charge became.

I guess one has to factor in crappy terms and conditions into the overall costs of a deal and of leaving a deal.
J_B.

jamesd

Contact them and tell them that you're interested in changing mortgage but won't because of the fee. Ask them whether they are interested in waiving the fee if you switch to a different lender. Don't tell them how and why you plan to change mortgage, just that you're considering it.

They have an interest in getting rid of their loans and may bite if offered the chance.

If they don't go for it, check whether a bridging loan is cheaper than the early repayment charge. Also be sure that paying money to those in the chain won't be enough to persuade them to accept a delay. Better to pay them than former Northern Rock.