Early Redemption Charges

pablo1979_2

Hi.

I could really do with some advice on my current position and hope someone can help.

Myself and partner re-fixed our current mortgage in early 2007 for a 2 year period, however, due to unforseen circumstances we are now looking to move and as a result increase our borrowing.

No problem I thought, just give our current provider a call and let them know the additional amount we need to borrow and move on. However, it doesn't appear that they are willing to lend the amount we require.

Having been on the web and spoken with a number of other mortgage providers, there seems to be no problem with them lending us the required sum (one well know provider for instance were willing to lend us upto £250k which is the best part of £100k above our current mortgage provider's upper limit).

Affording the new house is therefore not a problem if we switch but are we likely to get collared by our current provider for early redemption charges etc (3% of loan o/s) as a result?.

Something doesn't smell right to me and given I'm fairly new to the selling houses, mortgages game, I don't know whether my current provider is just trying to force me into a corner to shift mortgages so that they can claw this early repayment charge from me.

Any help or advice would be much appreciated.

Thanks

homer_j_3

You agreed to stay with your current lender for 2 years, if you want to break that contract then they are well within their rights to charge you to get out of that contract.

You are trying to exercise what is called the portability option that many lenders will offer as a "feature" of their product, however, it is not guaranteed and that they have to underwrite the risk and of they cannot accept that risk then can refuse it.

I appreciate the change of circumstances are unforseen and unexpected so to me you have no choice but to pay the 3% and swallow this.

The only way around it that I could see may be if you were to let it out and find a lender that would accept this aswell as the new borrowing for your next house. This could be risky though because you are then liable for 2 mortgage payments should the other house not let out or the tennant fail to pay rent.

pablo1979_2

Thanks for the advice.

Some of the providers I spoke to said they talked about a 'price match' type agreement whereby the early repayment charge would be waived if the current provider is unable to lend the amount that another provider could, all things being equal.

I have a brief look through my current providers terms and conditions and can see no mention of any such clause - is it worth trying this on? - I suppose nothing ventured, nothing gained?

homer_j_3

your lender will not waive the charge under any circumstance. Who is your current lender?

pablo1979_2

Currently with Portman who told me they're willing to lend £141k which is no more than they were willing to lend us 2 years ago when both our salaries were lower than they are now, although I appreciate interest rate increases etc may affect this.

Halifax were willing to lend £250k, A&L £223k.

Just seems like a huge disparity to me.

homer_j_3

Portman work on a basis of 3.5 x main income plus 100% of second applicants income or 2.85 x Joint incomes. Affordability checks are carried out in all cases to ensure that the mortgage is affordable and they do have the facility to enhance these multiples if they can justify affordability.

Alliance and leicester work on pure affordability and halifax do too which can often provide bigger income stretches if you have very little outgoings and no dependents.

I have never known any lender to offer a price match when you have committed to a deal. They may offer it on review but I have never come accross this because mortgage companies buy their funds in at set rates and have to work out what the best deal is to get the required profit margin and therefore make price matching a very difficult task for them to individually price chunks of the money borrowed as they have to maintain profitability.

pablo1979_2

Looks like I've not really got any other option apart from seeing how far Portman will stretch under our existing salaries.

I suppose I can negotiate to add any charges to the new mortgage taken out.

Thanks for the advice though, much appreciated.