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

dunstonh

Surely this £25 charge is unlawful

Why? Its a published admin charge. Known in advance. It is not a penalty. charges for providing a service are not unlawful.

If two window cleaners came to you and once cost £5 and the other cost £20 that doesnt make the one charging £20 unlawful. That is their charge for providing the service and you have the choice of using it or not.

does it cost the lender £25 in admin to change from a dd to a standing order and certainly not on a yearly basis? I not sure they could justify this?

Firstly they dont need to justify it. Secondly, it could actually be costing them this amount as standing orders are more expensive than direct debits. With the direct debit, the lender is in control. It knows it has the money. With standard orders, your bank sends the money to the lender. They dont know you have paid until they marry up the entry on their bank account with your mortgage account. £25 seems quite fair in that respect.

MarkyMarkD

Oilymo wrote: »

Having read the above should I be charged £25 a year by my mortgage lender for making over payments?

Here's the situation, my current lender will allow me to make over payments as I have a fully flexible mortgage however they will only collect by direct debit and only the required monthly amount. If I want to make monthly over payments I have had to ask them to cancel the dd and I have to send the money by standing order. Surely this £25 charge is unlawful. Does it cost the lender £25 in admin to change from a dd to a standing order and certainly not on a yearly basis? I not sure they could justify this?

Would love to hear back from anyone with any comments.

Oily

That is a pretty poor flexible mortgage IMHO. With my mortgage, I can specify any monthly payment amount I like and they'll collect it by DD.

But I don't understand your original premise. You can get them to collect the standard amount by DD and then make the overpayment by standing order, or indeed one-off BACS transfer. All you need is the necessary sort code and account number - which presumably they've already given you, or isn't exactly a secret? Have you tried just making an overpayment in this way? I don't see any need to cancel your DD payment.

Oilymo

The reason this has come about was I wanted to increase my monthly payments rather than phoning them up and making a one off payment. In order to increase the monthly payments I had to send them via standing order, it was not possible for the lender to increase the dd hence I incur a £25 annual charge.

Crying_over_spilt_milk

I can't work out if I might have paid/pay an ERC from what I've read. I sold my flat after about 4 years (mortgage was probably 25 years term) but took out a new mortgage with my partner after about 3 years (so there was an overlap of 1 year). Both mortgages were with the halifax. So, if you sell, does selling count as early repayment? I'm wondering whether the same will apply when we sell our current house...

dunstonh

Check your contract. It tells you the tie in period there.

Crying_over_spilt_milk

dunstonh wrote: »

Check your contract. It tells you the tie in period there.

I got an email to say you'd replied to my question but I don't think you can be! Who are you replying to please?

dunstonh

I am replying to you.

The contract offer letter you are given when you take out the mortgage (or when you remortgage/change deal later on) tells you the terms of the borrowing as well as the tie in period and the amount of penalty that will apply on early redemption.

Crying_over_spilt_milk

dunstonh wrote: »

I am replying to you.

The contract offer letter you are given when you take out the mortgage (or when you remortgage/change deal later on) tells you the terms of the borrowing as well as the tie in period and the amount of penalty that will apply on early redemption.

Oh thanks! So if there's a tie-in period that would still count even if the property's sold and you take out another mortgage with them? (It's the selling bit that I'm not sure about. I'd just assumed that that would be in a different category - esp if you used the same bank/co for the next mortgage).

As it's a "spent" mortgage I may not have the paperwork still. Would the halifax give me honest information about it if I ask them? (THey haven't always been very honest!)

dunstonh

So if there's a tie-in period that would still count even if the property's sold and you take out another mortgage with them?

If the mortgage is portable and you meet the criteria on the new lending, then you shouldnt have to pay the penalty. Some mortgage deals are not portable so it isnt an assumption that should be made.

Would the halifax give me honest information about it if I ask them?

There is no reason for them not to give you information.

Crying_over_spilt_milk

dunstonh wrote: »

If the mortgage is portable and you meet the criteria on the new lending, then you shouldnt have to pay the penalty. Some mortgage deals are not portable so it isnt an assumption that should be made.



There is no reason for them not to give you information.

I've no idea now whether the old one was portable, but even if it was, as I said I took out a new one which ran concurrently with the present one for a year, so, in effect I "repaid" it early by selling, I suppose...

Our current one is not portable as far as I'm aware and in any case as we're planning to emigrate we wouldn;t be porting it anywhere! This is why I'm keen not to get caught out when we sell.