Are we tied to our mortgage lender forever?

jenza8

We rearranged our mortgage on our old property for a better deal 3 and a half years ago with the discounted period being 4 years (with a redemption fee payable amounting to all of the discount to be paid back). 1 and a half years ago we moved house and took out a larger mortgage with the same Building Society (Barnsley Building Society). They did this by keeping the existing mortgage and taking out a new one for the extra amount. This was also done on a 4 year discounted rate (with redemption fees to pay if we came out of the arrangement early).

We are now having to think about renewing the original mortgage as the discount period for that runs out in September but we have now realised that we have been tied in to the Barnsley because if we found a better deal with anyone else we would not be able to take it because of the high redemption fees for moving the second mortgage.

The following is a quote from a letter from the Barnsley:
"If the mortgage is redeemed after 3 September 2007 but within 4 years of its commencement then an early repayment charge equivalent to the monetary value of the discount received on the new motgage based on the amount of £68,000 will apply. The maximum early repayment charge that can apply during this period is £5440. Part redemptions/capital repayments that exceed 25% of the £68,000 portion of the loan will incur an early repayment charge on the same basis in proportion to the amount redeemed."

As the Barnsley mortgage deals seem to involve a 4 year tie in period our two mortgages are always going to be 2 years apart (unless we carry on paying the original mortgage at the higher rate of interest with no discount for 2 years without taking out another discounted deal which will be very costly). This seems to mean that, unless we pay some pretty steep charges or pay over the odds on the smaller portion of our mortgage for two years until the new one expires, we are always going to have to keep our mortgage with the Barnsley.

Is this correct? Is there a way around it or have we been tricked into a deal we cannot escape from? (Sorry I suppose I should not have said tricked, rather have we agreed to a contract, the consequences of which we have not been made fully aware?)

Thank you.

Mr_helpful

I wouldnt know if you have been tricked but I would go back to the BS and ask them if it was miss sold. You should have had this explained to you and should have had the option of a top up at a no redemption penalty rate.

jenza8

Mr_helpful wrote: »

I wouldnt know if you have been tricked but I would go back to the BS and ask them if it was miss sold. You should have had this explained to you and should have had the option of a top up at a no redemption penalty rate.

Thank you, we were definitely not told this when we took it out, we were just told that when you moved house and required a larger mortgage it was done with two separate ones, the original and a new one rather than one new one combining both amounts. We were never offered any alternative.

We were told that the mortgage had a redemption fee if you left it early but it was never made clear that our old deal would run out two years before the new one, leaving us effectively tied to our mortgage lender unless we pay a large fee or an inflated interest rate. If we do either of these things then we may as well not have had a discounted mortgage deal anyway.

I will contact the Barnsley and ask if it was mis-sold but would they admit it if it was? Wouldn't they just say it was our fault for not realising that this was going to happen?

And yes - tricked was definitely the wrong word to use. Misled, mis-sold or mis-advised are more appropriate in my belief.

jamesd

Ask them what the charge will be on the newer loan at the time you remortgage the first one. From the look of it you can pay 25000 with no repayment of the discount saving and would then pay about 50% of 5440 * (68000 - 25000) / 68000 = 1720 in discount repayment to combine the two at the time you remortgage on the main mortgage. This assumes that you have 25000 available. If you don't, it'd be about 2720 instead.

Paying this to get things in synch looks reasonable if you don't get the option of taking say a two year variable rate deal instead of a four year one.

robertbruce

Hi
I'm hoping that you can check something which should help you.

If I am right, the secong part of your mortgage is treated as a separate loan, even though it is secured on the original property. This means that the penalty is only payable on the top-up portion after you pass the date of the original 4 year fixed rate.

If this is the case, it should make it affordable to move your mortgage in 2 parts.... the main part at the end of its 4 years and the second part at the end of the 4 years of the SECOND term.

You may find then your only problem is getting the NEW lender to accept that there is a secured loan on the property when they are lending on the larger amount, but its only the amounts that are different, the principle is the same, so argue your case that the smaller amount is actually the mortgage.

Hope his helps.