Early redemption mortgage, ways to minimise exit fees?

mihaid

Currently I have the balance + early repayment chg + redemption admin fee.


Would the ERC change if I made a one off payment before settling the full amount?

lee111s

You'd need to speak to the lender. They might not charge you the ERC on the first 10% (or whatever the allowed overpayment is).

ACG

Check when its due to drop - sometimes on the anniversary it reduces bt say 1% so it might be worth holding off a few weeks.

Gary123456790

The only other way I have found is to borrow money from a family member, then reduce the term of your mortgage to a very short amount, e.g. 2 years. This will make the DD massive so you will be paying off large amounts but should not incur early repayment fees as it is paying agreed amount.

Then when you come to redeem the balance is smaller and the ERC will be less. You will get the money back on redemption to pay the family member back.

I must warn that this does not come without its risks. I did it for a short period and the risk of not having enough money in your account when the dd is called for is bigger as the amount is a lot bigger, plus you may not be able to control accurately how many months the DD is large for due to there being no guarantee which month the bank will effect the change from.

If you have a failed payment this will affect future mortgage borrowing. It is safer if you do it before remortgage rather than doing it and then undoing it as there is more risk it will stay on for longer (bank slow to do something, never heard of that) and NO GUARANTEE that the bank will extend the term again (could have changed max lending age for example).

It is effectively playing with fire - I did it once and it was a little nerve wracking...

Gary.

StuC75

Unfortunately that is the peril of taking the fixed rate deal offered, they tend to allow overpayments to X percent of the balance at the start of the year, so if you 'Had' to pay it off now, then you could make the lump payment first, wait for that to clear then request the redemption figure , but that would only give a marginal improvement on the ERC (e.g. 3% of that 10% overpayment)..

Need to weigh up what the fee is, and how much more it is costing you on the mortgage compared to the money in savings until that ERC drops off..

mihaid

Well, I have the money now to pay the whole thing off and asked for redemption statement yesterday. Would it be too late to make the 10% (off what figure) now?


The anniversary is September, so no point waiting.

Thrugelmir

mihaid wrote: »

The anniversary is September, so no point waiting.

You could always port your existing mortgage to the new property. Then when the fixed term has expired remortgage the entire new mortgage to a new lender.

mihaid

I'm not moving. Just paying off the mortgage.

dimbo61

So you need to weigh up if paying the ERC is worth it or waiting until September.
You have the money in the bank to pay off the mortgage!
Now I paid £50 to my lender to reduce the term from 22 years down to 10 years!
You could ask to reduce the term down to 7 months so that it finished in September.
The monthly mortgage payment might be huge BUT you have the money sitting in the bank.
You will save the ERC of 2/3% and be mortgage free in 7 months

Thrugelmir

mihaid wrote: »

I'm not moving. Just paying off the mortgage.

Then does it save you money? Is the key.

mihaid

Well. The ERC is £1400 and compared with the interest I paid last year of £3500 it seems that I make a saving by not paying the interest until September. Is that right?