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early redemption penalties

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can someone please explain to me how mortgage companies can justify charging such high fees for the above? we have just moved house and had to repay nearly £4000. what work does a company do to be able to charge such an amount?

Comments

  • silvercar
    silvercar Posts: 49,528 Ambassador
    Part of the Furniture 10,000 Posts Academoney Grad Name Dropper
    They give you a mortgage rate less (or on better terms) than their standard variable rate. In return you agree to pay an early redemption penalty if you redeem the mortgage before an agreed date.

    Nothing to do with costs, all about agreeing to take funds for a certain length of time at a certain rate.

    To put it another way you agree to stay with then for x years and in return for your loyal custom you get the deal you want. If you then go back on your side of the deal, you pay the penalty.

    Of course life doesn't always follow the plan and so many lenders allow you to move your mortgage to a new home on the same deal without penalty.
    I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.
  • david29dpo
    david29dpo Posts: 3,915 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    correct. do you check any of this when you signed?
  • gstir_2
    gstir_2 Posts: 88 Forumite
    Yeah, I knew this fee would have to be paid if we moved our mortgage, i just wondered how companies charged all different penalties, i have heard of such a variation in the fees.
    We had a 2 year fixed rate, 5 months into it an ideal house came on market (we hadnt been planning on moving) and we offered and got it. Contacted same lender, they changed mortgage for us, now have 5 year fixed rate.
    It just seems alot of money to pay thats all, especially when staying with the same lender. Never mind, we have our ideal house now.
  • toonfish
    toonfish Posts: 1,260 Forumite
    gstir wrote: »
    Yeah, I knew this fee would have to be paid if we moved our mortgage, i just wondered how companies charged all different penalties, i have heard of such a variation in the fees.
    We had a 2 year fixed rate, 5 months into it an ideal house came on market (we hadnt been planning on moving) and we offered and got it. Contacted same lender, they changed mortgage for us, now have 5 year fixed rate.
    It just seems alot of money to pay thats all, especially when staying with the same lender. Never mind, we have our ideal house now.


    why on earth didn't you stay with the 2 year fixed rate you already had and save £4000?
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it.
    This signature is here as I follow MSE's Mortgage Adviser code of conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.



  • gstir_2
    gstir_2 Posts: 88 Forumite
    i didnt think that was an option, certainly when i asked our mortgage broker, he said we had to set up whole new mortgage deal, even although staying with same lender. should we have been able to stay on 2 yr fixed rate and just increase the amount borrowed? i took info from m/a thinking he was giving us best advice.
  • toonfish
    toonfish Posts: 1,260 Forumite
    gstir wrote: »
    i didnt think that was an option, certainly when i asked our mortgage broker, he said we had to set up whole new mortgage deal, even although staying with same lender. should we have been able to stay on 2 yr fixed rate and just increase the amount borrowed? i took info from m/a thinking he was giving us best advice.

    who was the lender? There are a couple that don't allow the mortgage to be ported.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it.
    This signature is here as I follow MSE's Mortgage Adviser code of conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.



  • gstir_2
    gstir_2 Posts: 88 Forumite
    a company called spml?
  • firesidemaid
    firesidemaid Posts: 2,136 Forumite
    Part of the Furniture Name Dropper Combo Breaker Bake Off Boss!
    i would have dealt with your lender direct for this - if you were staying with the same lender.

    you probably would have been able to stay on the same deal?

    why don't you speak to them direct and ask them if that was possible. it may be that your lender and/or broker did not realise or were trying to make money from you.
  • toonfish
    toonfish Posts: 1,260 Forumite
    southern pacific - I don't know of the top of my head if they allow porting but I will find out for you tomorrow. I presume there was som eadverse credit involved.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it.
    This signature is here as I follow MSE's Mortgage Adviser code of conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.



  • HelpWhereIcan
    HelpWhereIcan Posts: 1,343 Forumite
    Spml mortgages are generally not portable - which explains why you would have had to pay the penalty even though you stayed with them.
    I am an IFA (and boss o' t'swings idst)
    You should note that this site doesn't check my status as an IFA, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
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