Switching deals and ERCs

Mwaggle

Background:

My partner and I purchased our first house almost 2 years ago for 194k, taking an 80% LTV mortgage (£155k). The fixed period for the mortgage ends 31 Aug 2015, and we are projected to owe ~£144k on the mortgage at the end of the term. Since buying the property we have used our savings to do up the house, and based on property prices in the area now estimate it is worth ~£240k.

We have no debts other than student loans, but are looking to lend approx £10k to finish the last of the work on the house. We also have good credit reports and have never had a late payment, etc. We would ideally like to add this extra £10k to the mortgage. We don't think there will be an affordability issue as could afford to pay the 7% that I've heard many places are using as a check. We currently overpay on our mortgage and the decrease in LTV would mean we should be able to secure a lower interest rate anyway.

My question is:
If I were to take this scenario to my current mortgage provider (Halifax) and ask them if we could switch deals early to get the increase in mortgage amount for the work on the house, do you think it even remotely likely that they would waive the ERC? The timescale we are looking at is approx 3 months before Halifax say we can change deals (May 2015). I am doubtful but wondered if anyone had any experience in this?

The only thing that makes me think they would even consider it is that if they do not allow it then we would look at getting a loan instead, and not with them as there are better rates out there, so they may be keen to secure our extra debt?

I know the only way to be certain is to approach Halifax but I was hoping someone might be able to offer some words of wisdom

Thank you

lee111s

They won't remove the ERC, it makes no sense for them to do it.

Yorkie1

They will not waive the ERC if you redeem the mortgage and change to another completely different deal (or lender).

Money for fixed rates is borrowed by the lender from elsewhere, and the ERC is essentially the cost to the lender if you repay the funds earlier than planned.

I don't know whether they'd agree to additional lending as a sub-account on your existing mortgage.

Thrugelmir

Unlikely the ERC will be waived. Rather than overpay the mortgage build your savings and fund the work yourselves.

Mwaggle

Thanks for the replies and confirming what I first thought.

They do offer sub accounts but at a higher interest rate so I'm not interested in doing it. I'll just look again at my options and most likely hang on till May when I will I will be able to switch with no ERCs.

Thanks again

Thrugelmir

Mwaggle wrote: »

They do offer sub accounts but at a higher interest rate so I'm not interested in doing it. I'll just look again at my options and most likely hang on till May when I will I will be able to switch with no ERCs.

You can switch products. Additional borrowing is a separate matter.

amnblog

Halifax will charge you a modest fee for a full revaluation of the property if you wish to work on the £240,000 valuation figure.

This is because on their system they will only have a valuation based on the initial purchase price.