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

NewlyFrugalMumof3

Hi there

Would love any thoughts on my predicament.

We have a fixed rate mortgage totalling £138K.
It is split into 3 parts:
1. £57,487 @ 5.54% with ERC £2019 until 31/3/12 term 23 yrs 4m
2. £62,631 @ 5.54% with ERC £1878 until 31/3/12 term 23yrs
3. £18,277 @ 6.24% with ERC £548 UNTIL 31/1/11 term 9yrs 5 m

have overpaid part 3 down from £25K to current £18,277 and reduced term from 15 years down to 9.5 years. We are now overpaying £100/month.

We can't really overpay anymore as I am putting £400/month into an Emergency Cash Fund.

Am wondering because of all the interest rate cuts if it would be prudent to pay ERC and switch to either Offset mortgage or another fixed rate, or whether to stay as am. It is frustrating that paying over the odds for security when we could be better off on a much lower rate.

My OH'S job is safe at mo, but his company have made many redundancies so am still worried. We have 3 young children and I am a SAHM. I want to get a part-time job when youngest is in nursery but that won't be for another year. I am also aware how little I have in our pension pots. I am 39, OH is 41. We have 2 cars but I really can't see how I could manage without mine as used to not have car until DS3 arrived and now how hard it is without.

Have been MSE fan for quite a while and have made considerable changes to our lifestyle, but am worried about that most of our money is taken up with bills and very little left for pension provisions and savings. Hence why I would like to make savings with mortgage.

any advice would be fantastic.

thanks :rotfl:

MarkyMarkD

ERCs of £4,445 plus remortgaging costs of around £900 = £5,345.

Balance on mortgages = £138,395.

If you can get a rate of 4.5%, fixed for 3 years, you'd be saving 1.54% for 3 years on £120k and 1.74% for 2 years on £18k = a total of £6,170.

So it's hardly worth switching - after taking the new mortgage fee off the saving, it's pretty much even stevens.

If you can get a fixed rate for 3 years under 4.5%, though, with a relatively low fee, it probably makes sense, as long as you can actually get the mortgage. But that goes without saying.

NewlyFrugalMumof3

Thanks MarkyMarkD.
Thanks for your figures and your thoughts. Doesn't look so great now that I can see what I would need to find to make any decent savings. I will have a dig around at rates and fees and equity ratios and see if there are any options. Otherwise I will continue overpayments and keep eye on mortgage products.

When calculating the savings did you add the ERCs and mortgage fee £5345 to the balance of £138,395 or not, as we would have to add that to a new mortgage anyway (haven't got it to pay upfront).

MarkyMarkD

Makes no difference if you pay it up front or not - it's still a cost you're incurring right now. OK, if you add it you are incurring interest on it, but you could effectively pay the fees off by overpaying by the amount of your interest savings.

k1mmie

Hi, I was clearing out some old paperwork and found some papers for an old loan that we had with Future Mortgages. I think they were bought out some time ago by Associates and then Citifinancial. I noticed the at the ERC was £576.56, but then we also paid £7,789.23 which would have been the figure for clearing the loan early. Do we have any claim on any refund of the ERC figure or is this about right? Thanks.

dunstonh

Do we have any claim on any refund of the ERC figure or is this about right?

The ERC and mortgage closure fees are two different things. Are you sure the mortgage contract didnt state the ERC?

ERCs are lawful and fair when disclosed and are normally put on the contract offer letter (as well as the mortgage key features illustration).

k1mmie

dunstonh wrote: »

The ERC and mortgage closure fees are two different things. Are you sure the mortgage contract didnt state the ERC?

ERCs are lawful and fair when disclosed and are normally put on the contract offer letter (as well as the mortgage key features illustration).

To be honest I am not sure. This was repaid in 2003. I am guessing that with this kind of company (Subprime) hat maybe they were not as upfront as they could have been. I would like to send them a letter anyway to see if I can get any rebate. Is there a template I could use. Thanks.

dunstonh

I would like to send them a letter anyway to see if I can get any rebate. Is there a template I could use.

No. ERCs are not refundable and there is no evidence of ERCs being repaid so there is no template. The FSA only made a ruling on the mortgage closure fee. There is a template for that.

biggerted

I have a first direct offset whih allows overpayments without penalty. However there is a sliding scale erc if the mortgage is redeemed - couldn't I simply repay all but a tenner - to keep the mortgage live and go off to the new lender?

dunstonh

biggerted wrote: »

I have a first direct offset whih allows overpayments without penalty. However there is a sliding scale erc if the mortgage is redeemed - couldn't I simply repay all but a tenner - to keep the mortgage live and go off to the new lender?

No. The lenders are not that stupid. They set limits on how much you can overpay without activating the ERC.