ERCs- Early Repayment Charges - early exit fees. (merged).

dunstonh

but if I had not down sized I may have lost my house.

Between a rock and a hard place.

There should be some system in place that reduces the amount of payback over time (like the assurance policy you take out to pay off the mortgage).

Many ERCs do reduce. Often along the lines of 5% in year 1 dropping by 1% a year. It really depends on the type of mortgage deal you choose to buy.

You should be lobbying for this in your role as financial advisors.

I'm an IFA, not a mortgage adviser. So, what lenders do isn't really a concern of mine. I leave that to the experts in mortgages. However, to be fair to the lenders, the ERC is a valid fee because of the way deals are structured and the liability to the lender if you repay early. You fell foul of not meeting their lending criteria this time round. If you had met the criteria they usually waive the fee as long as you stay with them.

MarkyMarkD

It's actually fairer, in many cases, for the ERC to increase throughout the discount/fixed term, and then to decrease during the years after the discount/fixed term ends. That reflects the profitability of the deal for the lender - loss-making for the discount/fixed term, in many cases, and only profitable once on SVR.

Because of the bad press for "overhanging" penalties, though, the market has moved towards ERCs which end when the fix/discount ends, but (quite often) are charged in a less logical way during that fixed/discounted term.

Flat fees throughout are unfair. Taking the example of a 5 year fix, those who leave at 4 years 11 months into a fix have had nearly all the benefit, but pay the same as those leaving after 1 month who've had next to none. But equally well, charging those who leave on day 1 of year 6 nothing is unfair too - they've had all the benefit, and not paid any SVR at all.

swiss_life

Hello All

I have a mortgage with C&G and deliberately selected a mortgage that allowed me to make one off payments without any penalty. This process I have done several times at no extra cost. however the last time I made a payment I found that I was charged a 10 pound admin cost. I spoke to them and questioned the extra charge. They informed me that I had been sent a letter informing me of this. However I don't remember ever receiving this and still do not think that it is okay to introduce a cost like this when previously there was none. What do you think. Is this okay for them to do?
Thanks for your help

MarkyMarkD

There's another specific thread on this: http://forums.moneysavingexpert.com/showthread.html?p=15212733. I think the answer is to pay the extra money electronically (via BACS/DD) rather than by cheque.

Polly_Pod

Just after a little advice, we renegotiated our mortgate in 2006 with the same provider (mortgage has been with them for 7yrs). We are in the process of selling our house as we are moving to Australia & our mortgage statement came through yesterday (which we were pleased about so we could know exactly where we were up to) and it shows an early repayment charge of 3%. Thing is we didn't know there was one as it's not shown on the revised agreement and we weren't told about it.
Any suggestions on how to deal with this?
Thanks in advance everyone )

dunstonh

Thing is we didn't know there was one as it's not shown on the revised agreement and we weren't told about it.
Any suggestions on how to deal with this?

Pay it or dont move. They are your options.

The ERC should be shown on the KFI issued at the time you bought the deal. It would also have appeared on the mortgage contract letter you signed. If you used a mortgage adviser it would also be in their suitability report/closing letter. Many solicitors point out the terms as well, providing you use a face to face one.

You are going to have a hard job to say you werent told it. If you are adament that it didnt appear on anything you signed then you could complain to the lender and when they refuse to refund it, you can take it to the FOS. Current timescale with the FOS is about 9-14 months before you get an answer and that assumes neither party appeals. Not ideal for your timing I guess.

meaniegreenie

Hi I have a fixed 5 year and would like to change to interest only whats my chances and will i be charged for this? just curious as not actually changing my mortgage and would still be paying interest as same rate?
thanks

dunstonh

meaniegreenie wrote: »

Hi I have a fixed 5 year and would like to change to interest only whats my chances and will i be charged for this? just curious as not actually changing my mortgage and would still be paying interest as same rate?
thanks

You will be charged. The lenders get the deal financed by investors and pay penalties themselves if you come off the deal. This is why they charge you. The only incentive for them is if getting rid of you altogether is better option for their finances (e.g. Mortgage express)

FT29

Hi, I came to the end of my 3.99% fixed rate mortgage in June 2008 and, with the climbing interest rate, took a 3 year fixed at the best rate I could reasonably get at the time which was 6.29%. Obviously this is a bit painful now and hindsight is a wonderful thing, but with the 3% early redemption penalty and £150 release fees I'm looking at £5000+ costs to "buy myself out" now.

The mortgage is approx 120,500 capital, 44,000 interest-only, with just over 14 years to go.

Doing some sums using First Direct's Base Rate Tracker product as a comparison it appears that I will not be better off over the remaining 2.5 years on the reduced rate taking into consideration remortgaging costs on top, despite saving approx. £225 per month on the mortgage payment.

Do I sit tight and do some recalculations in a year's time, grin and bear it for the remaining 2.5 years on 6.29% and vow to check early redemption penalties much more closely in the future or is it worth pursuing a remortgage now? I'm thinking I'll recalculate in a year's time.

MarkyMarkD

dunstonh wrote: »

Pay it or dont move. They are your options.

The ERC should be shown on the KFI issued at the time you bought the deal. It would also have appeared on the mortgage contract letter you signed. If you used a mortgage adviser it would also be in their suitability report/closing letter. Many solicitors point out the terms as well, providing you use a face to face one.

You are going to have a hard job to say you werent told it. If you are adament that it didnt appear on anything you signed then you could complain to the lender and when they refuse to refund it, you can take it to the FOS. Current timescale with the FOS is about 9-14 months before you get an answer and that assumes neither party appeals. Not ideal for your timing I guess.

As the original mortgage was taken out 7 years ago, it won't be regulated and the product switch won't have a KFI.

But the borrower should have been given details of the new product, and any ERC applicable, and should have signed up to these revised terms.

Ask the lender for a copy of the document you signed, agreeing to the switch and the ERC.

If this document exists, as Dunstonh says, you will have to pay the ERC.