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

smorgo

_Andy_ wrote: »

It's an exit fee not an ERC.
If it was detailed in the mortgage offer then yes you are being unreasonable.

It's labeled Early Redemption Charge on the mortgage statement and there's a separate itemised exit fee, so I have to disagree.

My logic for challenging it is this:

Despite being a contractual term, there is protection against unfair terms in contract law.

Given that this is 13 years into a 25 year mortgage, which was neither fixed for any period of time, nor discounted in any way, I don't believe that this ERC is compensation for costs incurred by the building society. Rather, I see it as a penalty for terminating the contract. Building societies aren't allowed to penalise their customers; it's the same reason that banks have been having to refund excessive bank charges in recent years.

If it's a penalty and not reasonable compensation for losses incurred by the building society, then I think it's an unfair term under contract law.

Now, we may not have a leg to stand on, but it's worth considering discussing it with the building society on those terms, isn't it?

After all, ERCs of this length are not the norm and one has to wonder why.

smorgo

MarkyMarkD wrote: »

£229 doesn't sound like an MEAF from 13 years ago - it's too high.

It sounds more like a (not very common) condition in the mortgage which requires payment of a month's interest (say) for early redemption at any time, in other words a slightly unusual form of ERC.

As Andy says, though, if this was referred to in the mortgage offer then it is due for payment.

The figure's about right for a month's interest (maybe a little high, but in the right ballpark), so I suspect you're right.

dunstonh

Despite being a contractual term, there is protection against unfair terms in contract law.

And no-one has found the fee to be unfair. The FSA took a look a year or two back and didnt find them unfair.

Building societies aren't allowed to penalise their customers;

Who says?

t's the same reason that banks have been having to refund excessive bank charges in recent years

You mean the court case that the banks won?

Ivrytwr3

Currently 4 years 9 months into a 5 year fixed deal with A & L. Our mortgage paperwork states that ERC's are payable, but not sure how much they wil charge or if they will enforce the charge with so little time left

MarkyMarkD

They will charge the full amount due, almost definitely 3% of the balance.

Being 3 months away from the end date is irrelevant.

But you can "port" the mortgage to a new property, or simply wait three months to sell (if you are simply selling up and not buying another property) and hence avoid the ERC.

gailmadras

We took out a personal loan secured on our house (mortgaged with RBS) with I Group. I can find nowhere on the paperwork that says we were tied into the loan with I Group. We then switched our mortgage from RBS to GE money. We had to pay over 3000 pounds ERC for an 11000 pound loan. GE money were formally I Group so why did I have to pay ERC? They are the same company so did not lose any money plus we were paying over 15% interest from the start. Confused. Help!

MarkyMarkD

Hi Gail

I'm afraid that I've never heard of a secured personal loan which DOESN'T have an ERC. And normally secured personal loan ERCs are significantly higher than on equivalent first mortgages.

Before you remortgaged, you must have had redemption statements from both RBS and I Group. Or your solicitor must have.

You should have queried the ERC before redeeming your secured loan. And equally well, your solicitor should have checked with you that you were "happy" to pay an ERC of £3,000 which is not insignificant to most people!

Why did you remortgage? Was it to borrow more money? If it was merely to get a better rate then the £3,000 may easily have been enough to make the remortgage decision incorrect.

Did you get advice from a mortgage broker regarding the remortgage? If so, the mortgage broker should have factored the ERC into the decision to recommend GE Money.

What I'm getting at is that the decision to remortgage, despite the ERC, was the responsibility of three people - you, your solicitor, and your broker (if you used one). If the solicitor and the broker both referred to the ERC and you told them to go ahead, anyway, then it's your own choice. If they failed to inform you about it, then they were negligent, and you should seek recompense from them. (Unless the remortgage was good value despite the ERC and you are saving money overall).

picardygirl

Apologies if this has been asked before, had a quick look and couldnt find anything .... so here goes!

I currently have a NRAM mortage, which is a flexible 5 year tie in product, i have one year left to go. I have been "told" that my bank could save me money even if i pay the ERC on my current mortgage, not sure they can, but am prepared to let them work the sums out for me!

So i've called NRAM to confirm exact figures outstanding etc, cant give me a redemption figure over the phone, and the chap told me the ERC is payable on the entire loan amount 4 years ago, not as is the current balance now ..... is this bog standard on all mortgages, or is it as the chap told me because my NRAM mortgage is "flexible".

MarkyMarkD

It depends on the lender and the terms of the deal. I can see that it's quite reasonable for it to be based on the original balance, but with many lenders it is based on the actual current balance.

Worth reviewing your KFI which should spell this out.

picardygirl

I've looked on the Offer of Loan, and all it says is "the maximum charge you could pay is xxxxx" which is 4% of the original loan plus a £700 help with costs fee, which has now expired, which is another issue now, as far as i can remember this £700 was to be reduced off my mortgage, but NR are now telling me it was paid into my bank account and quoted which bank account yet my bank have no record of this being paid into my account in the relevant 4-6 weeks after the supposed transaction, so NR are dealing with that one at the moment.

Back to my ERC, in my conditions of mortgage offer, it doesnt state any specific like ERC is payable on original loan, just says ....... "and any early repayment charge referred to in the Offer". Surely, i should have in writing somewhere that the ERC is payable on the original loan.

I'm not trying to get out of trying to pay ERC, as i was fully aware of what we signed up to, but if we do end up moving our mortgage, i obviously only want to pay what i should, no more, no less, and especially after this £700 help with costs supposedly been paid back to me, i have very wary of what NR are actually telling me.