Adding ERC to new mortgage question

BristolExile

Hi

I currently have 150k remaining on mortgage. Looking to move house and hopefully borrow 170k. I am thinking that ditching the fix will be worthwhile as I am currently on 5.49% and early repayment charge is 5k. If I can get a rate of c.£4% I would save money.

However, if I can add the early repayment charge to the new mortgage does this increase the amount I need to borrow by £5k? Is this even worth doing? I would save £5k up front for potential new house renovation costs but may cost me another c.£1k over the next 25 yrs?

amnblog

The two matters are unrelated.

You pay the rep on sale.

If you wish to borrow an extra 5k on purchase that is a separate matter.

BristolExile

I have heard there is sometimes an option to 'add' the charge to the new mortgage though? Is this not true or am I mis-understanding?

Let_Us_See

Yes, you are correct. Basically, you are simply increasing proposed borrowing by £5k in anticipation of cancelling out a penalty charge on redemption of existing mortgage. It is up to you to decide whether it is worth it paying interest on this £5k over the remaining mortgage term.

kingstreet

If you decide to borrow extra to refund yourself the ERP you've paid, you have to watch out for the lender's maximum LTV level. If you want 90% and then decide you want another £5k, if the lender's limit is 90% you won't be able to borrow more.

You aren't technically adding it to the loan, you are simply reducing your "deposit" by £5k and having a £5k bigger mortgage. This may, or may not be possible, depending on the rest of the case.

amn put it much more succinctly, but you seemed to need further explanation.