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

biggerted

but, what if they were that stupid?

MarkyMarkD

More to the point, no you cannot because you cannot get a replacement mortgage on the same property without redeeming the original mortgage.

jozshi

Hi there,
Bit of a mortgage novice, so any advice will be gratefully received...
We are currently approx 18months into a 10 year (yikes!) fixed rate mortgage with Nationwide @ 6.14%. Clearly given the recent drops in interest rates, we are wondering whether we should be paying the ERC and finding another deal sharpish? The total ERC at the moment would work out to be roughly £4500.
Any thoughts??

Ah, just a thought... you may also need to know the outstanding mortgage is about £150,000

MarkyMarkD

It depends a lot on your level of loan-to-value (LTV).

You certainly won't save money by remortgaging to another 10 year mortgage IMHO - there are hardly any longer-term deals on the market and the rates are not very much lower than your current one.

And if your LTV is over 80% or in some cases over 60%, you won't get anything like the best advertised rates.

If you chose to pay the £4,500 and then remortgage to a shorter-term fixed rate, you are taking the risk which you originally chose to reject, by reverting to a variable rate a lot earlier than your original 10 year term.

If you are serious about the idea, I think you should speak to a mortgage adviser - and keep bearing in mind my comments about losing the security of being fixed long-term, which presumably you valued when you originally chose a 10 year fix.

GooWorld

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?

MarkyMarkD

No.

This has been asked and answered many times!

You cannot redeem your mortgage unless you redeem it.

If you don't redeem your original mortgage, a new lender will not advance a mortgage because they would only have a second charge.

You cannot avoid ERCs this way - that is why (some) lenders allow limitless overpayments.

hypercheaptraveller

Hi,
I have read most of the posts, but I am gonna ask a couple of things just to be 100% sure I haven't missed anything.

Have a small mortgage (well below LTV) which I was "forced" in early 2008 to remortgage as current fixed deal had ended and SVR was 7.5% and over. New rate is 6.08% or something like that fixed for 3 years .. 2 yrs left. I'm not in the worst situation compared to other people here .. however I am desperate in paying less interests.
As there is a high ERC to pay, and as far as I understand there is NO WAY to get around it (right ???) the only thing I'm left to do is that every year (as soon as the anniversary passes) I make the maximum overpayment allowable (10%) which doesn't incur penalties.

Am I doing the best thing to reduce payments/interests whithout giving MORE money to the lender ?
Is there anything more ? No way to avoid ERCs if I'd like to remortgage ?

Thank you all for your help.

_Andy_

hypercheaptraveller wrote: »

Hi,
I have read most of the posts, but I am gonna ask a couple of things just to be 100% sure I haven't missed anything.

Have a small mortgage (well below LTV) which I was "forced" in early 2008 to remortgage as current fixed deal had ended and SVR was 7.5% and over. New rate is 6.08% or something like that fixed for 3 years .. 2 yrs left. I'm not in the worst situation compared to other people here .. however I am desperate in paying less interests.
As there is a high ERC to pay, and as far as I understand there is NO WAY to get around it (right ???) the only thing I'm left to do is that every year (as soon as the anniversary passes) I make the maximum overpayment allowable (10%) which doesn't incur penalties.

Am I doing the best thing to reduce payments/interests whithout giving MORE money to the lender ?
Is there anything more ? No way to avoid ERCs if I'd like to remortgage ?

Thank you all for your help.

You weren't 'forced' to take any mortgage.
No there is no way around paying the ERCs

dunstonh

Have a small mortgage (well below LTV) which I was "forced" in early 2008 to remortgage as current fixed deal had ended and SVR was 7.5% and over.

No-one forced you. It was personal choice.

Is there anything more ? No way to avoid ERCs if I'd like to remortgage ?

No. Unless you are lucky enough to have a lender that wants shot of you and is willing to waive the ERC to allow that to happen, then it is enforced.

ERCs are fair and legal and its your choice if you pick a deal that has one or not. So, there is nothing else you can do about it.

laratigger

I have fixed interest only mortgage with just over 3 months to go. The redemption charge is equivalent to 6 months interest. I understand the lenders position, they don't want to lose money, so I'm quite happy to the pay the interest till the end of the 3 months. I am about to propose this to the lender. . Would they be unreasonable to accept the 3 months as the redemption charge, as they would in effect not be losing money?