early redemption penalties

gstir_2

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?

silvercar

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.

david29dpo

correct. do you check any of this when you signed?

gstir_2

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

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?

gstir_2

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

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.

gstir_2

a company called spml?

firesidemaid

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

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.

HelpWhereIcan

Spml mortgages are generally not portable - which explains why you would have had to pay the penalty even though you stayed with them.