Early Repayment Charge

dan_laura

kingstreet wrote: »

Apply for your new mortgage with Coventry and port the current rate to the equivalent amount, hence leaving no ERP to pay.

Take the increased borrowing on one of Coventry's current products.

When the current rate ends, ask them for a customer retention product on that sub-account.

Charges are levied to reimburse the market counterparty which funded the fixed rate, either retail savers, or money market investors. The lender has no flexibility to negotiate with them and has the same flexibility with you.

The lender tries to obtain the best terms it can, to make it more competetive. A higher rate may have had easier ERPs. Unfortunately, only the borrower can factor-in what changes in circumstances he/she may encounter during the life of their mortgage product.

Thanks king Street thats a great answer. I think that might be a route i attempt to go down. I guess a 30miles trip to my "local" branch is in order to discuss things face to face.

Goldiegirl

dan_laura wrote: »

5.00% of the balance repaid until
31.03.16, then 3.00% until 31.03.18,
then 1.00% until 31.03.19
You can repay up to 10% of the capital
p.a. without an early repayment charge.

this is also now the terms of which the same building society offer their fixed terms. So i think from the changes they have made and the fact as you get closer to the end of your tern the % charge reduces because obviously they have offset a lot of their losses. I think although these changes occurred shortly after i took out my fixed term it shows that even the bank felt they needed to make their terms more fair. So to me that would suggest mine are excessive.

I wouldn't say excessive - just different to what they currently are.

In fact at 9.33 this morning, according to your post, you didn't think the terms were excessive, but by 9.42 you were suggesting they were excessive

There's no real point in railing against the ERC for your product - it's what you signed up for, so there's no benefit in comparing them to the current product.

As I see it,the choices are

Ask if you can 'port' the product to the new mortgage.

Wait until July to move

Move before 30/6/14 and pay the ERC's

I realise that none of this is what you want to hear.

I suppose you could try to appeal to the lender about not paying the ERC - but you'd need to put together a case indicating dire necessity, rather than wanting to move in the spring because it'd be pleasant to enjoy the whole summer in your new house.

Even so, I'd be gobsmacked if the ERC was waived

dan_laura

Its not that i think the fee's in themselves are excessive. Its that i believe they are when taken in relation to the physical amount that i need to pay in the remaining months. And i don't wish to move for the reason of "having the whole of summer" in my new home. We want to move for the fact we need a bigger place, and also house prices in my area "outer metropolitan" are increasing quite sharpish, at about 5% in the last 6months, that means not only would properties we currently see worth £250,000 now would be worth closer to £260,000 by mid-end summer this in itself could add over £5000 in extra stamp duty. I will pay this ERC "i know i signed up to it" etc etc i just wanted some opinions off people. I wondered if anyone had any dealings with building societies relating to these charges, and whether when 95% of the way through a contractual term that you signed up for they were prepared to negotiate. I dont mind paying a fee to leave the mortgage early. What pains me is that i could give them my remaining 3 months installments and tell them to keep the capital value and i would be nearly £2k better off than paying the charge.
even though i would be handing them money that would of been my capital and the money that would of been the interest upto and including the point in which they have set out that they wouldnt be losing any money in relation to what they borrowed to borrow!

And i know terms and conditions change, and i am tied into the ones that are in my current mortgage, which state that they have to right to change fee's etc related to my mortgage as long as a "reasonable" amount of notice is given to the consumer. But yet the fee they have changed that benefits me and not them they have not changed. Yet over the duration of the term they have increased the cost of default payments late payments etc (not that i have had to pay any) but yet the ERC within the company decreasing they have held at the same level on all existing products. I think the term here is having their cake and eating it!

getmore4less

If you don't have a buyer and an accepted offer in on somewhere then March/April is a bit ambitious to be moving anyway.

June might even be a stretch

kingstreet

The ERPs are set as part of the deal with the party funding a tranche of fixed rate lending, as is the rate and any upfront fee. Where something gets better, something else gets worse, so the better the rate, the longer and higher the ERP and vice versa. That's why the last few months payments are irrelevant. You would not have had the rate and payments for the first four years and nine months, without committing to the timescale you did.

If better ERP terms are available on current products, that's because the lender has negotiated a better deal, the funding party has relaxed its stance, or the lender has found a new source of funding.

The ERP is not a "fee" charged by the lender, so there's no question of "fairness" or anything else you might have read about bank charges or similar in the Unfair Terms in Consumer Contracts Act, or wherever.

When you mention arrears fees, admin fees or similar, those are lender levied service charges and lenders are not able to apply higher charges than what was applicable at the time of taking your mortgage. As an example, lenders trying to charge increased mortgage release fees from what was quoted at the outset, were made to refund the difference by the FSA.

I hope you now find the situation clearer.

dan_laura

we have a provisional offer on a place with no chain and awaiting to put our place on the market but it is in a highly sort after location due to its rental value as its very close to london commuter trains. March might be ambitious but pre june 30th is realistic. The average period of properties on our development being up for sale in the last 8months is 12days, all 5 properties sold since summer have been sold at the asking price in under 3 weeks. So we basically have no chain

getmore4less

It not just the selling time it's how long to completions?

opinions4u

dan_laura wrote: »

I didnt sign up to something where i believe the terms to be excessive.

That's good then. Have the terms changed? Didn't think so.

At the point of taking out the mortgage i didn't expect to move within the 5 year term. But the requirement for a bigger property can come from nowhere. In the 5 years the capital has reduced from 75,000 to 68,000 based off the fact it is a % the early repayment charge hasn't really changed barring a few hundred quid.

None of that makes sense as to why you think the charge is excessive.

You knew what you'd signed up for. The pricing of a mortgage product takes in to account fees, rate and ERCs. It's highly likely that the ERC was used to subsidise the interest rate you've benefit from for the last 4+ years. A lower ERC would have required a higher interest rate for the product.

If your best explanation as to these charges is the answer you gave your probably not worth anyones time on this forum

I've expanded on the "explanation" above. but the reality is it's what you signed up. It hasn't changed. It's the deal you agreed to. They've disclosed them up front in black and white on more than one document.

So while you might not like my post, it's a cold hard fact that you got the deal you wanted, you were fine with it then and now seem to think it's "excessive".

Spangled

dan_laura wrote: »

Hi All,

We are looking to move home ASAP, the problem we have is that our mortgage has an ERC attached to the fixed term. This term ends on 30-6-14. We would like to be moving march/april time. The coventry who manage our mortgage say that we have a 4% fee for ending the mortgage early. I totally understand why these fee's exist and i am happy to pay an amount but i find 4% with only 3months remaining on the fixed term a bit excessive. Basically They want us to pay £3000 if we end the mortgage before 30-6-14 but we only pay £450pm month for our mortgage. so if we move in march as we hope that would leave only 3 payments on our mortgage totaling £1350. So i would like to know if anyone can help answer, i dont really feel this £3000 as it is calculated as a % of the remaining balance is fair. As a genuine loss to the company of me repaying early how can this genuine loss me more than they will receive in payments from me until the fixed term ends? especially as the mortgage is a capital repayment so a portion of that £1350 will be paying off capital. Any advice will be well received.

Thanks
Dan

I don't quite understand this.

You say in your original post (#1) that your fixed term ends on 30 June 2014.

But your later post (#10) says you have ERCs until 31 March 2019.

So actually your fixed term ends on 31 March 2019 - yes?

kingstreet

In post #10 he's quoting a current Coventry product to illustrate the ERPs are better now than they were when he took out the original product.