High Exit Charges - Do I qualify for a refund?

Rosemariec

I took a 3 year discounted mortgage with the Scarborough in September 1997. Penalties applied for repayment in the first 5 years, but I paid my mortgage for the first 5 years and then changed to another lender (First Direct). At the time FD were surprised at the exit charges applied by the Scarborough - suggesting I should query them which I did. The Scarborough pointed out that in addition to the penalties of early repayment during the first 5 years, at any time during the lifetime of the mortgage I repaid early, I would be charged 1 months interest. This seemed excessive to me - particularly given that they were prepared to waive this charge if I took a new mortgage with them (Scarborough). that is if I remained a customer. I have my original mortgage offer, but cannot find the redemption statement (although my new and current lender may have a copy). Do I have a right to claim against this excessive and discriminatory (i.e customr vs non customer) charge - as the mortgage was for £140,000. - I believe I was charged a fee of £1400 - a charge which I cannot see valid against what work would have been required. Indeed as FD said at the time "that seems rather excessive when all they (Scarborough) are doing is going to the cellar, opening a drawer taking out your file and filling in a form to send to us!" Please kindly advise.

MarkyMarkD

Early Repayment Charges (ERCs) are NOT covered by the FSA's ruling on Mortgage Exit Administration Fees (MEAFs) and there's no requirement for them to be "reasonable".

You have no chance of recovering them - they are a legitimate term of your contract with your previous lender.

Quite a few building societies have or had this term. Normally they actually charged interest to the end of the month of redemption, NOT a month's interest - in which case your solicitor should have advised you to delay remortgaging until the last day in the month in which case you'd have lost nothing. If this IS the case, you should be approaching your solicitor for compensation for their negligence.

If your lender DID have a straight one month's interest penalty (and, as I say above, I doubt it) then there's definitely nothing you can do. Sorry.

By the way, I very much doubt that one month's interest would have been as much as £1,400 - that implies an interest rate of 12% or more.

LisaT186

Some lenders do apply a one months interest penalty on exit, it would have been in your terms and conditions. Also if you make that months payment some actually charge you for the whole month, whether you have the mortgage for the month or not. Either way £1,400 does sound excessive. One months interest at their current variable rate of 7.14% would be about £833. Mind you their current mortgage Discharge fee is £150 and their redemption administration charge £95. Call them and ask for a break down of fees paid when you redeemed your mortgage.