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

brities

a lender is allowed to charge an extortionate charge if I leave for a better deal with the same lender

dunstonh

brities wrote: »

a lender is allowed to charge an extortionate charge if I leave for a better deal with the same lender

Correct. And quite right too.

Remember that the deal is being financed by investors. The bank will suffer costs if you want to terminate the deal.

moneybaba

Is it true that ERC can be charged for over £25000 mortgage only? If your mortgage is below £25000 then it can not be levied. Please advise. THANKS.

moneybaba

I am advised that ERC will apply only if GILT RATE falls below current rate. If it stays as it is or goes up then hurray, NO ERC payable. Please advise as to what is current Gilt rate what will be the trend in about 5 years. Thank you.

dunstonh

Is it true that ERC can be charged for over £25000 mortgage only? If your mortgage is below £25000 then it can not be levied. Please advise. THANKS.

No. Nothing in that.

I am advised that ERC will apply only if GILT RATE falls below current rate. If it stays as it is or goes up then hurray, NO ERC payable. Please advise as to what is current Gilt rate what will be the trend in about 5 years. Thank you.

Nothing in that either.

I can confirm that when it rains in on the second Wednesday in the month, they cannot charge it then.

Andyboy

paid 10% as allowed under T&Cs
reduced mortgage to 3 years (when ERC ends)
will pay 10% off in new year etc and invested the money.....ok so you need that pot of money to start with and I did need to be made redundant to get it but you gotta make the best of a bad situation!

tim091

Here is my situation:

Coming to the end of my 3 year tracker deal. I have 14 years left to pay on the mortgage and have no intention of moving (house or lender).

If I understand it correctly my options are:

Do nothing and I will revert to either BMR or SMR (not sure which) but if SMR that is currently 3.99%.

Take out a new deal (fixed would be the obvious choice) at 3.9 - 4.1 depending if 2 years or 5 years. (No product fee).

But, as I understand it if I go with the second option I have to pay £465 ERC. This I do not understand as I am not repaying my mortgage (I wish!), I am merely changing the deal on the same mortgage surely?

Or do lenders consider any change to what they call a different 'product' actually a change to a whole new and different mortgage? Do they actually consider it as paying off the "old" deal with the new one? If so that seems a crazy way of doing things. It seems the same if you want to borrow a few grand more during the life of your deal. It looks like they treat that as a request for a whole new mortgage for the outstanding amount plus the new request, rather than an additional loan amount to the exiisting arrrangement. Is that the way it works? Again, seems crazy to me!

Any advice welcome.

dunstonh

But, as I understand it if I go with the second option I have to pay £465 ERC

Unlikely. Most deals and tie ins are the same. So, if your deal is ending, the ERC will as well.

o lenders consider any change to what they call a different 'product' actually a change to a whole new and different mortgage?

The deal has to be financed. Hence charges. However, you are not subject to lending criteria with your same lender (unless its a deal linked to Loan-to-valuation)

It seems the same if you want to borrow a few grand more during the life of your deal. It looks like they treat that as a request for a whole new mortgage for the outstanding amount plus the new request, rather than an additional loan amount to the exiisting arrrangement. Is that the way it works?

No it is not. The further advance will be treated as new money and subject to application process. Most will treat it as a number 2 loan and show it separately. Only if you remortgage would it be consolidated.

tim091

Thanks for clarifying some things. But the bit I still don't get is when you change to a different product. Why is it considered a whole new mortgage? (i.e. paying off the old one and starting a new one).

They lent me x amount 5 years ago. Obviously they borrowed that money themselves to do that. Any changes to interest rates or the way I pay, or terms and conditions (i.e. change to a new "product" when a term is up) is surely still on that original sum of money that they have borrowed. How can they incur any change in charges themselves whatsoever when they borrowed the money 5 years ago?

A charge to transfer to a new "product" of £1000 is surely blatant money grabbing. Besides admin costs of processing the paperwork they incur no cost whatsover.

Thrugelmir

tim091 wrote: »

Thanks for clarifying some things. But the bit I still don't get is when you change to a different product. Why is it considered a whole new mortgage? (i.e. paying off the old one and starting a new one).

Its not a new mortgage. A mortgage is actually the legal charge placed on your property to secure the debt owed. However a new product will have new terms and conditions that will comply with current legislation and FSA requirements.

A charge to transfer to a new "product" of £1000 is surely blatant money grabbing. Besides admin costs of processing the paperwork they incur no cost whatsover.

Product fees are primarily to discourage remortgaging or the taking up of products by borrowers with small balances. Without product fees mortgages would increase in cost across the board.