Investigating remortgaging, ERC question

alexlyne

Hi

We have half of our mortgage on halifax SVR 3.5%
The other half is 2 years in to a 5yr fix at 6.4%
Our LTV is just shy of 80% (we can put cash in to make 80% if necessary)

I'm planning to sit down and work out if in theory we are better off switching to a new sub-5% 5yr fix or not. YBS have good deals, though someone commented on another post very recently that they're picky - maybe not a problem with excellent credit records, but OH switched to part-time since last mortgage app.

Anyway, down to my question, we would have an approx 2k ERC. Will we have to pay that off in cash, or would a new lender put it on their loan? - if so would they calculate that cost into their LTV calculations?

Cheers

alexlyne

Another quicky, kind of related.
I've never paid product fees, but these are added to the mortage loan if i understand correctly.

Hypothetically, if the house was worth 200K, and the outstanding loan amount we transfer is 160K, then that's 80% LTV. If there was a 2K product charge, the loan amount would then be 162K... does this mean that we couldn't get the 80% deals?
Ta

kingstreet

Most lenders will allow product fees to be added on top, even if it breaches the LTV threshold. You'd need to check before you commit yourself though.

On the ERC, you would need to borrow enough to cover the whole mortgage redemption cost which would also include the ERC, unless you wanted to put some cash in yourself.

SAMMYE_2

How comes the mortgage is split?

Generally it will go onto the loan although you can opt to pay it with cash but if you didnt then yes it would raise you LTV...

You might get away with upping your estimate in relation to how much it is worth slightly but they will value it themselves but if its not a million miles away you might get away with it.

kingstreet

Yorkshire BS don't have any 80% threshold fixed rates. So you'll get the same deal upto 85%.

alexlyne

kingstreet wrote: »

Yorkshire BS don't have any 80% threshold fixed rates. So you'll get the same deal upto 85%.

Nope, you're right. Think I was looking at a couple of different places get rough figues (nationwide, Northern rock, woolwich)
NR have 4.58% 5yr on 80%ltv, for instance. 1K fee.

alexlyne

SAMMYE wrote: »

How comes the mortgage is split?

Generally it will go onto the loan although you can opt to pay it with cash but if you didnt then yes it would raise you LTV...

You might get away with upping your estimate in relation to how much it is worth slightly but they will value it themselves but if its not a million miles away you might get away with it.

split because we moved house and ported the old fix which has now expired.

alexlyne

So a new lender would probably put the ERC fee from the old lender onto the loansheet for the mortage, but it will affect the LTV. Any new fees from the new lender will go onto the loan (if I want it to) but won't affect the LTV.

Many thanks for the info.

Also, perhaps one more clarification on the ERC before I go home and hunt out the info, would the ERC be based on the outstanding loan amount, or the initially lent amount? I'm pretty sure that it's the latter - do different lenders have different rules?

Thanks

kingstreet

ERC depends on what you signed up to.

Some charge a number of months' interest, others a percentage of the amount being redeemed.

As an example, the Halifax current five year fix has ERC of;-

5% of amount redeemed in year one
4% of amount redeemed in year two
3% of amount redeemed in years three to five inclusive.

kingstreet

As you're with Halifax, the back of your latest mortgage statement will tell you exactly what it will take to redeem the mortgage, including ERC and any applicable discharge fees.

alexlyne

kingstreet wrote: »

ERC depends on what you signed up to.

Some charge a number of months' interest, others a percentage of the amount being redeemed.

As an example, the Halifax current five year fix has ERC of;-

5% of amount redeemed in year one
4% of amount redeemed in year two
3% of amount redeemed in years three to five inclusive.

That amount looks familiar, as by my own reckoning we are going into year three in a couple of months time, I'm looking at 3% which is what you have here. So as the original loan was 65K it'll be 1950.

And not - unfortunately - 3% of what's left (which'll be around 59K as we have overpaid this part) - this was what my question was about, sorry if I wasn't clear.

( I get a statement so infrequently...)