Early redemption question regarding trackers

rqy99g

If I take out a tracker mortgage which say has a fixed interest rate of 1.9% for two years over a period of 15 years which would give me a repayment of around £640 per month.

There often is a clause regarding the redemption which says something like should I pay it of early there will be a 3% early repayment charge on the sum repaid until say March 2017.

Am I reading it right in thinking that should I be lucky enough to pay it of after say 18 months that I would pay 3% of 18 x £640 (which I make it to be £345.60)?

pinkteapot

It's 3% of the mortgage balance, not 3% of repayments that you've made so far!

So, if your mortgage balance outstanding after 18 months is £100k and you pay that off in full, the fee is 3% of that, ie £3,000.

If it's got an early repayment charge for two years and you're in a position to pay it off after 18 months, just wait the extra six months until there's no ERC and then pay it off.

Alternatively, get a lifetime tracker which has no ERC at any time...

rqy99g

pinkteapot wrote: »

It's 3% of the mortgage balance, not 3% of repayments that you've made so far!

So, if your mortgage balance outstanding is £100k and you pay that off in full, the fee is 3% of that, ie £3,000.

If it's got an early repayment charge for two years and you're in a position to pay it off after 18 months, just wait the extra six months until there's no ERC and then pay it off.

Alternatively, get a lifetime tracker which has no ERC at any time...

Doh! Sorry the amount is based on a £100,000 mortgage!

rqy99g

pinkteapot wrote: »

It's 3% of the mortgage balance, not 3% of repayments that you've made so far!

So, if your mortgage balance outstanding after 18 months is £100k and you pay that off in full, the fee is 3% of that, ie £3,000.

If it's got an early repayment charge for two years and you're in a position to pay it off after 18 months, just wait the extra six months until there's no ERC and then pay it off.

Alternatively, get a lifetime tracker which has no ERC at any time...

I thought my interpretation didn't seem right! However it is misleading as this taken direct off the Post Office site. "Early Repayment Charges: 3% of the sum repaid until 31/03/2017"

Any recommendations for lifetime trackers?

Cheers

Simon

stephenni1971

rqy99g wrote: »

I thought my interpretation didn't seem right! However it is misleading as this taken direct off the Post Office site. "Early Repayment Charges: 3% of the sum repaid until 31/03/2017"

Any recommendations for lifetime trackers?

Cheers

Simon

Nothing misleading there. If you pay off your mortgage after 18 months youre paying off over £95,000 early so it's 3% of that...

pinkteapot

rqy99g wrote: »

Any recommendations for lifetime trackers?

Cheers

Simon

We're with HSBC:
https://www.hsbc.co.uk/1/2/mortgages/mortgage-rates (scroll down to the tracker section)

Doesn't look like they do our product any more though. Ours was max LTV 60%. Bank of England base rate plus 1.49%, so currently paying 1.99%. Their products now start at max LTV 70%. The high street specials have our rate but with huge booking fees. :eek:

HSBC are notoriously fussy lenders. Only bother if you're in a permanent job (they don't do contractors) and have an excellent credit score.

rqy99g

pinkteapot wrote: »

We're with HSBC:
https://www.hsbc.co.uk/1/2/mortgages/mortgage-rates (scroll down to the tracker section)

Doesn't look like they do our product any more though. Ours was max LTV 60%. Bank of England base rate plus 1.49%, so currently paying 1.99%. Their products now start at max LTV 70%. The high street specials have our rate but with huge booking fees. :eek:

HSBC are notoriously fussy lenders. Only bother if you're in a permanent job (they don't do contractors) and have an excellent credit score.

I have just seen First Direct are doing a Lifetime Tracker with no arrangement fees or redemption at 2.19% We would just have to pay for a home buyers report £330. Looks not to bad as although the interest rate is slightly higher than a lot of them it is offset by not having the steep £999 arrangement fee.

pinkteapot

rqy99g wrote: »

I have just seen First Direct are doing a Lifetime Tracker with no arrangement fees or redemption at 2.19% We would just have to pay for a home buyers report £330. Looks not to bad as although the interest rate is slightly higher than a lot of them it is offset by not having the steep £999 arrangement fee.

Sounds good. :money:

How long have you owned the house?

We had to go with Santander for our mortgage when we bought, as I was on a contract. I was made permanent prior to completion, grrrr! We had to own the house for six months before we could remortgage, but we did remortgage to HSBC as soon as that six months was up. Because we'd only bought six months ago and they could see the sale price (and our LTV is low), they decided they didn't need to bother with a valuation survey!! Saved us that fee that we were expecting to pay.

Bear in mind that you do have to pay solicitor fees for remortgaging. I had quotes from local solicitors of around £600 (£300 legal fee, plus VAT and disbursements such as searches).

However, just before we appointed our solicitor HSBC happened to mention that, so long as we used their solicitor, they covered the legal fees for people remortgaging from other lenders to them! Another unexpected saving. First Direct are part of the same group as HSBC so worth asking if they offer the same.