Early Repayment Charges

jontyg

Hi Ladies and Gentlemen (and others)

To set the scene. I currently have a mortgage with Halifax with £175k outstanding. I have spoken to them and they have informed me that I can pay up to 10% of the value of the mortgage per year. The value is the amount to pay on the 1st Jan each year.

My question is does anybody know how the Early Repayment charges are calculated? I am just wondering if the charge is outweighed by savings in interest? I asked Halifax, but they said they need to know specific amounts of repayment before they could tell me the ERC. I kind of just want to try a few different options in excel to firgure out the best fit for me.

Hope all that gibberish makes sense!!!!


Cheers

Jontyg

midnight_child

It depends on how much the ERC is (in terms of %), and also does the charge step over time. e.g. 5% now, 4% next year and so on. It also depends on the terms of your mortgage - most say it is 10% of the balance as of Jan 1st, rather than 10% of the initial mortgage amount. You need this info from your bank/BS.

However, unless you have over 17.5 grand to pay off this year then I wouldnt worry about this, and just overpay what you can afford.

midnight_child

Forgot to add....

If you are in a lucky position to be able to pay off everything (I wish I could), then make sure that they dont try to charge ERC on the 10% you are allowed to overpay without a fee. You could pay off 10% first then pay the balance once this first payment has cleared.