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

lyster101

dunstonh - I have a question to put to you if you'd be kind enough to have a look at it. This is the scenario, based on my situation but with figures changed just enough to distance it from myself. Apologies if it has been asked before.

Imagine having bought a £200,000 3yr, 5% fixed repayment mortage 2.75 years ago on a property. The mortgage has a ERC of 3% of the initial transfer within the initial period. Now imagine that accepting an offer to buy the house and the completion date is in exactly one month's time. The 3% fee'll be £6,000 to 'repay' the mortgage. As the monthly morgage repayments are £1169, and there are three months to go until the magical 3yr point is hit, repayments would be £3,507. That's about £2,500 less than the ERC.

My question is: Is there anyway that the mortgage can still be continued, without the property itself acting as collateral? This would effectively treat it as a massive loan and, as obviously, the rate on a uncollateralised loan would be higher than the mortgage rate as there would be no collateral, so I would extend this to speculate that the proceeds of the sale - in cash, in an account at the mortgage provider - could itself be used as collateral, in place of the property.

I can thoroughly understand that by redeeming early, the mortgage company would be losing out on the minimum interest they would expect from a deal, especially if this is within the first few months. However, is there any grounds for compromise win this situation, where it clearly become cheaper to keep the mortgage than to repay the ERC and hold the funds until the 3yr periods ends?

Is the only answer to sit tight until the 3 yr date ticks over?

MarkyMarkD

Can the mortgage be continued - no.

Is the only answer to wait until the 3 years expire - yes.

Is there any grounds for compromise - no.

dunstonh

MMD beat me to it and I agree with his response.

You can ask the lender for a bit of if they will reduce the ERC based on the facts you have laid out here but you would be totally reliant on their goodwill. Sometimes they show some. Although most will give you a polite "get lost"

walshi123

Hi there, there's been an update to my original post:-

The Halifax have admitted that they made a mistake in adding my ERC's onto my mortgage without my knowledge , apparently I should have been informed to pay them up front in branch. If they HAD carried out this procedure correctly then I would have been suddenly aware that the transaction was going through 3 months too early! I would have simply postponed the transaction for 3 months and not paid ERC's. However the Halifax are still not willing to listen to this argument and have just fobbed me off with going to the Ombudsman. Do I have a case against the Halifax as well as my broker?





Original post:
Hi All, forum newbie here.

Last year I received a letter from my broker stating that the fixed rate term for my mortgage with Halifax was due to finish and did I want him to get me a better rate? I agreed and he went ahead and found me a better rate which was still with the Halifax as it happens.
However - It has since transpired that this was 3 months early! Halifax have charged me over £1500 in ERC! Obviously I would have just waited another 3 months for my fixed rate period to fully finish if I had known. I followed my brokers advice thinking it was safe to do so.
My broker is aware of the situation and he is fighting with the Halifax to refund the charges. The Halifax appear to be not wanting to budge, which I can understand. However it still leaves me as the innocent party with a £1500 cost!

If my broker loses the fight with the Halifax, would there be any kind of process for me to receive financial compensation? At the end of the day it was bad advice from my broker that's cost me. I'm loath to go against my broker as I respect him, but if I have to...

Any advice welcome

MarkyMarkD

Sorry, but I don't find that convincing at all. There is no reason why Halifax should have required the ERC to be paid up front in cash - most lenders would simply add them on to the mortgage if you chose to switch products in the middle of the ERC period on another product.

You would have been aware of the ERC being charged, because you would have been given information on the amount of the new loan - which would have been more than the original balance by the amount of the ERC.

In any case, all of this is the broker's fault, not Halifax's. Why on earth are you allowing the broker to delay compensating you whilst he "fights with Halifax to refund the charges" when it's his problem?

And how can you respect a broker who made such an idiotic mistake?

walshi123

Thanks for the reply Marky Mark.

I have a letter from the Halifax Customer Relations which I'm now quoting from directly -

"I do note that the ERC due from your previous special rate product FRP*** were incorrectly added to the mortgage. As you have been made aware these should have been paid prior to the new product being applied"

Despite of the above admission from the Halifax I'm starting to think along your lines of my Brokers idiotic mistake! I think I'll take that avenue of approach from now on. I obviously don't really care as long as I get compensated for the money I've paid for other peoples mistakes!

Regarding making a compensation claim against the broker, how do I go about this, what's the process? (You've probably all gathered I have no experience at all in this kind of thing!)

MarkyMarkD

Write to your broker, complaining that he gave you negligent advice and that you would never have remortgaged at the point you did if you had been informed of the ERC.

The broker should have a complaints process.

If he responds fobbing you off, send him a "letter before action" (google it if you don't know what I mean) and then take him to small claims court. Easy to do online. If he doesn't settle out of court I'm a Dutchman.

stphnstevey

I'm renting out a house that I previously lived in, had a Nationwide mortgage and at the time they didn't charge extra for letting it out as they didn't have any Buy to Let mortgages. Took out a long term fixed rate and was quite comfy.

Saw they recently added a Buy to Let business to their portfolio and low and behold, now they are saying they are going to charge an extra 1.5% for letting out the property. Looked at their Buy to Let rates and it would be about 1% lower.

But as on a fixed rate there is a hefty redemption penalty. Although there two technically two seperate companies (Nationwide and Mortgage Works), going to give them a ring and ask if I can switch the mortgage over and possibly wave the redemtion penalty.

They say they are allowed to change the rate as it is an extra charge and their charges can vary at any time???

MarkyMarkD

It depends on what basis they granted permission to let, and when it happened.

If you had permission to let before you took out the fixed rate, and that permission to let was indefinite, and specified that no additional amount would be payable, then I don't believe they can do what they have done.

But if the permission to let was for a fixed term, they can do anything they like at the end of the fixed term.

There is no logical reason why they will let you exit the fixed rate without paying the ERC.

By the way, do you have sufficient equity in the property to get the BTL rate you believe you could switch to?

MarkyMarkD

It depends on what basis they granted permission to let, and when it happened.

If you had permission to let before you took out the fixed rate, and that permission to let was indefinite, and specified that no additional amount would be payable, then I don't believe they can do what they have done.

But if the permission to let was for a fixed term, they can do anything they like at the end of the fixed term.

There is no logical reason why they will let you exit the fixed rate without paying the ERC.

By the way, do you have sufficient equity in the property to get the BTL rate you believe you could switch to?