Early repayment question?

Ryan12345

Hi

ive only just joined the forum and wanted to find a bit more about mortgages as next year I'm hoping to have a mortgage the question I have is if say for example I take out a £70,000 mortgage at 95% LTV and lets say for example the cost of this mortgage with the interest over the full term is £100,000. So I have my mortgage but I want to pay it off in full as I want to sell my property. I understand I would have to pay an early repayment fee depending on the mortgage type but what I want to know is do I only have to pay the amount borrowed or the amount borrowed plus the interest?
This may seem like a stupid question to some but I can't find anything anywhere stating either
Thanks for your time 👍

stator

It's on the amount borrowed, it does not include interest.
But check your mortgage documents, it will either be the same charge throughout the mortgage fixed period or it will reduce usually every year. So it might be £5k whenever you pay it off. Or it might be £5k first year, £4k second year etc.
You can sometimes avoid paying the ERC if you port your mortgage to a new house. But then it gets a little complicated if you need to borrow more

M0ney

My first thought would be to ask for a redemption figure when you were looking to pay it off and this would be very close to the outstanding balance of the mortgage at the time. The only thing which would be added would be an ERC if there was one on your mortgage.

Ryan12345

Thanks that's what I thought it does seem a bit daft if you had to pay the interest early as well... My plan is to get a mortgage to buy the house and sell within the first year to make a profit after renovating. I just want to check everything before I start. The big problem I have at the minute is getting the deposit together and at the moment the only deposit that seems realistic is 5%. Could anyone point me in the right direction as to which mortgage would suit my situation?
Thanks For your advice
Ryan

kingstreet

A property has to be suitable security for a mortgage. If you want a renovation project, it may not be mortgageable.

If the lender's surveyor believes essential repairs are needed, a retention may be held. This means you would have to increase your deposit to purchase the property; then get the essential repairs done and ask for the retention to be released.

You'll need additional funds for your project in addition to the deposit and purchase costs. You can't get a bigger mortgage to pay for this.

Ryan12345

I'd be looking for something in need of modernisation nothing too drastic?? I am a roofer by trade and would be doing most of the work myself and have family in the building trade so labour costs would be to a minimal. I do realise though that the 5% deposit might not be enough. Coupd I take out a mortgage as if I'm going to be living in it but sell it anyway or are there any implications for me doing this ? Thanks

pinkteapot

If I've understood your original post, you're not querying the early redemption charge at all. What you want to know is how much you have to pay to redeem the mortgage (ignoring the ERC).

You pay the balance outstanding, plus an interest accrued for the days between your last monthly repayment and the completion date of the sale. This is known as the redemption figure.

The £100,000 in your original post is the total cost over the life of the mortgage. It only applies if you keep the mortgage for its whole life.

If you took out a mortgage for £70k and paid it off the next day, you'd pay £70k plus one day's interest (not much!).

The £100k includes 25 years worth of interest (or however long you get the mortgage for).

stator

Ryan12345 wrote: »

I'd be looking for something in need of modernisation nothing too drastic?? I am a roofer by trade and would be doing most of the work myself and have family in the building trade so labour costs would be to a minimal. I do realise though that the 5% deposit might not be enough. Coupd I take out a mortgage as if I'm going to be living in it but sell it anyway or are there any implications for me doing this ? Thanks

You can live in it whilst you do it up and then sell it on. If you plan on doing that don't get a fixed rate mortgage with an early repayment charge.
However you will find it very difficult to find houses that any mortgage company will lend on that need building work doing.
You would have better luck on a house that is sound and needs no building work but just needs new decor, as the valuation will take that into account without causing problems.

kingstreet

If you intend to become a "flipper" buying somewhere, doing it up and selling it on quickly, be careful.

Do a few of these a year and instead of dodging capital gains tax as these may be your "principle private residences" HMRC will treat you as a property developer and any profit you make will be treated and taxed as income.

In addition, when you come to sell, if it's within six months of you buying, your buyers will have difficulty getting a mortgage as many lenders operate a rule where they won't accept a mortgage application on a property until it's been owned by its current owner six months, or longer.

Ryan12345

Thanks for all your replies its really appreciated.... I was going to live in it as I'm renovating as you said. so would the chances be slim for me to get a mortgage on a run down property ? I will have to keep my eye out for a good deal on a property that only requires cosmetic work. As you said don't get a fixed mortgage because of early repayment fees which type of mortgage would be good for me selling early ?
Thanks again for all replies

jamesd

To get a standard mortgage a property has to be habitable. That normally means at least water tight with working sanitary, cooking and heating systems of some sort. Many refurb projects will meet those requirements and you won't have a problem temporarily stripping out a kitchen during the work.

Tracker mortgages usually don't have significant early repayment charges. There usually is a hundred or five hundred sort of range of mortgage ending charge for everyone who ends the mortgage, whether it's at the normal term or early.