Is it possible to port a joint mortgage to 2 separate to avoid ERC

welshnanny

First of all,apologies if this topic has already been covered,I'm new here and would really appreciate some help.

My daughter and her partner have separated,they have a joint 5 year fixed mortgage with Santander and are about half way through the term,they are looking at roughly £6,500k ERC. Their house has just sold and both want to buy a new property each.

Neither one can afford to take the full mortgage forward to a new property on their own so there would still be some ERC due if one or the other were to take it forward to a new mortgage.

Is it possible for each to take half the mortgage or any other percentage to their respective new mortgages? I am aware that it's the interest that's ported ,not the mortgage,we just need to find the best way forward to avoid these fees as it was already fixed at a higher rate {4.99%}than they would have subsequently achieved had they not fixed.

They thought they were safeguarding themselves against interest rate hikes but as we all know,the reverse happened and after paying more than they needed to pay all along it seems they now have to pay even more to get out of it.

Many thanks in advance,hope someone can help.

MarkyMarkD

Well, for starters, they should have sorted this issue out before putting the house on the market, not after paying off the mortgage and the ERC.

Apart from that schoolboy error, most lenders will allow a mortgage to be ported to one single new property, not split between two. However, asking never does any harm. (And asking before selling would have been better ...)

Meeper

No, they won't allow the ERC to be split. In addition, even if one of the parties felt comfortable in being able to afford the whole mortgage on their own and move it to a new property, the lender may not feel the same way and may not be willing to remove the second party from their obligation. Lenders like to have 2 people to go after for cash instead of one in most situations.

welshnanny

Thanks,they haven't actually paid off the mortgage or any ERC yet as the house sold only this week and it's still a couple of months from completion.

Although my daughter has been paying the mortgage on her own,in full and on time since the split,Santander reckon she can't afford that much mortgage on her wage.

Despite the fact he has not paid anything towards the mortgage for the last few months the absent half will however expect half the proceeds ,if there's any left after Santander gobble up the equity in fees.

Hindsight is a wonderful thing ,I hope they can learn from it and move on.

Thrugelmir

welshnanny wrote: »

Despite the fact he has not paid anything towards the mortgage for the last few months the absent half will however expect half the proceeds ,if there's any left after Santander gobble up the equity in fees.

Keep a record of payments made. Seems reasonable to deduct this before splitting the remaining equity.

welshnanny

Thrugelmir wrote: »

Keep a record of payments made. Seems reasonable to deduct this before splitting the remaining equity.

I would have thought so too but apparently his solicitor says he is entitled to a 50-50 split regardless of who actually made the payments.

Are there any action groups re the ERC,seems to me that Santander and no doubt the other lenders are being very greedy in fixing a mortgage at a higher rate than they would normally get in the current climate yet still charge an extortionate fee to end it,it's a real win win situation for the big boys and very unfair on young people sruggling to make ends meet.

My daughter is up the wall with it all which is why I'm doing my best to get all the info I possibly can from the experts on here,thank you all.

Thrugelmir

welshnanny wrote: »

Are there any action groups re the ERC,seems to me that Santander and no doubt the other lenders are being very greedy in fixing a mortgage at a higher rate than they would normally get in the current climate yet still charge an extortionate fee to end it,it's a real win win situation for the big boys and very unfair on young people sruggling to make ends meet.

So why did they choose a fixed rate interest product?

Just because circumstances have changed and the situation is not in favour of the borrower. Is no justification for a complaint.

The ERC is imposed for commercial reasons. As lenders are still committed to paying interest on securing the funds for the term of the product.

kingstreet

That's a novel question/idea.

So, for example, we have a £200k joint mortgage in the names of A&B and A&B want to sell the current property and take a separate mortgage on two different properties in each one's sole name for say £100k?

So A ends up with a £100k mortgage on one property and B a £100k mortgage on another?

If the lender is happy to lend to each one of them I can't see why this shouldn't be possible in theory...

In practice, I fear it may never have been requested before, so the answer may be in the negative.

Worth a try though.

welshnanny

Thrugelmir wrote: »

So why did they choose a fixed rate interest product?

Just because circumstances have changed and the situation is not in favour of the borrower. Is no justification for a complaint.

The ERC is imposed for commercial reasons. As lenders are still committed to paying interest on securing the funds for the term of the product.

They "chose" it as it was the only option available to them with a 10% deposit,Hobson's choice really.It's very difficult to save,pay high rents and bring up 2 children and they really went without to save the 10% deposit The variables wanted 25% deposit which they didn't have so it was a choice of a 5 year fixed or no mortgage.

I don't really understand why you are defending the banks [unless of course you are in the industry].There can be NO justification for charging ,in this case £6.5k for admin and rather than costing the banks money,surely my daughter's monthly repayments at 4.99% have been subsidising the bank and recompensing them somewhat for the lower repayments from the fortunate people who had a larger deposit to start with and therefore paid back less money over their term.

Their relationship broke up which they did not foresee,just as they did not foresee lower interest rates . Yes banks need to protect themselves but at whose expense? Nobody has defaulted on this mortgage but the penalties seem severe and to my mind unfair when they have already paid way over the odds

kingstreet

welshnanny - you seem not to understand the way fixed rates work and the purpose of an early repayment penalty.

If I want to lend you money at a fixed rate, I have to go into the money market and buy a rate swap. That commits me, the lender, to paying a fixed sum for the fixed period. If I lend it to you and you want out of it during that time, I have to continue to pay the holder of the swap in full, so I pass on that charge to you, the borrower, in the form of the ERP.

Normally, a fix for a short period carries a ERP of perhaps 2% of the amount borrowed, while a longer term fix will see a ERP of around 4% to 5%. This is completely normal and has nothing at all to do with your daughter's lender making an excessive profit on her misfortune.

All you can do is try the idea discussed earlier to mitigate or avoid the penalty if at all possible...

welshnanny

Thank you Kingstreet for explaining it to me so very politely in an uncondescending manner.Replies such as "so why did they take it" from a previous poster are no help at all ,especially when the answer is obvious !

It's refreshing as a newbie to be treated with respect and understanding,thank you.

They will of course go down the porting route to either one or the other and who knows,maybe both.

They cannot be the first to find themselves in this situation......surely?