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

d9rra

Hi I have just found out a old mortgage statement it says early repayment charge for product :£3187.00 and redemption administration:£199.00 dose mean am up the creek and cant get jack back because the £3187.00 is a ERC

Noz

d9rra wrote: »

Hi I have just found out a old mortgage statement it says early repayment charge for product :£3187.00 and redemption administration:£199.00 dose mean am up the creek and cant get jack back because the £3187.00 is a ERC

Indeed, the £3197 can not be reclaimed.

Crying_over_spilt_milk

Can someone explain the legal difference to me between "Early Repayment Charge" & "Mortgage Exit Admin Fee" (if that's the correct term) please? C/Would you get both charged to an account?

Scott

An ERC is a [edit]charge[/edit] for redeeming a mortgage early, and is clearly noted in your offer of loan, under section 10 titled "What happens if you do not want this mortgage any more?".

This is non-negotiable, the only way around this being to have your mortgage product "ported" to your new property if you are moving. This means to take the rate, with the same terms and conditions, onto your new mortgage, for the same amount or more. This is not always possible, due to either the product not being portable, no longer being offered by the company or the new property being unsuitable.

The charging method for these is usually a percentage of the balance, a set amount of month's interest or some other method (linked to money market's, original balance, etc).

Mortgage Exit Admin Fees are exactly what it says on the tin, a fee for the closure of your mortgage. According to the FSA's last statement on the matter, this will be charged as at the level stated in your last offer of loan (including product switches and further advances) or in the accompanying documentation (tariff of charges, etc). These often go by different names, such as sealing fee, deeds release fees, discharge fees, etc, but are all basically for the same service. In more modern offers, this would again appear in section 10.

These fees are what is in contention, not ERCs.

You can incur both of these charges on the same mortgage, yes, if you redeem within the tie-in period specified in your offer of loan.

Overpayments are handled in section 11 of your mortgage offer, entitled "What happens if you want to make overpayments?".

Please feel free to read MarkyMarkD's excellent post on ERCs for further information.

MarkyMarkD

Great post, Scott, apart from your use of the 'p' word:

Scott wrote: »

An ERC is a penalty for redeeming a mortgage early.

An ERC is not a penalty for breach of contract, but a charge you agree to pay if you take the option of redeeming your mortgage (or paying off the capital) during the ERC term.

If it were a penalty, it might possible be reclaimable. But it's not.

careerlady

Hi Citrine - I have a much worse situation if that helps
check out career lady on mortgages and endowments - so your lender is probably much kinder than mine.
It seems the word portability needs thorough investigation - certainly by a solicitor as well as an IFA so you are one hundred percent sure you know what you are buying into.
My ERC will be 20K - I had no preferential rates at all however because I ran a company and was self employed I had to go self cert and you really pay for that!

good luck with your plight.

stphnstevey

Your advice, dear sirs, would be appreciated!

I have a ERC on a property I rent out - I can overpay by 10% a year in monthly or in a lump sum. I am considering selling the property and thought an overpayment might reduce the ERC, but the bank says any overpayment would effect the ERC till next year? Never heard of this before

MarkyMarkD

stphnstevey wrote: »

Your advice, dear sirs, would be appreciated!

I have a ERC on a property I rent out - I can overpay by 10% a year in monthly or in a lump sum. I am considering selling the property and thought an overpayment might reduce the ERC, but the bank says any overpayment would effect the ERC till next year? Never heard of this before

ERCs may be on the balance at the time of redemption OR on the original amount lent.

Just because a mortgage allows overpayments does NOT necessarily mean that the ERC on redemption is reduced by the amount of those overpayments.

The lenders who operate the same policy as yours are doing it to stop borrowers taking advantage of them by overpaying immediately before redemption, exactly as you wish to do.

It's worth reading the mortgage conditions in more detail next time you take out a mortgage as there are lenders who charge ERC only on the exact balance at the date of redemption - which could be next to nothing if you can liquidate some other assets to pay off most of the mortgage before redemption.

Hope that helps.

Scott

Great post, Scott, apart from your use of the 'p' word

Oops! Thanks for catching that.

JBEILBY

Just paid off my mortgage early with Britannia had 5 years left to go but used some of my redundancy money to get rid of this last debt. It cost £30 to pay this off. They did try to charge £35 to have deeds returned but I would not accept it - deeds being returned without charge.

Am now completely debt free and taking early retirement at 55. Remember you can quit the rat race you just have to make do with a little less cheese.