Avoid early repayment charges?

mrmbridges

I wonder if anyone can help me?

We are moving to a new house. The chain is all in place: first time buyer - our house - new house (private sale with friends) - deceased estate. A completion date of August 1 has verbally agreed with our friends as they are moving to new jobs that start in Sept with new schools for their two children - this date was quite important to them and was the basis for our private sale.

Our current mortgage (the two year lower rate part) runs out on Sept 30th, and we have just discovered that there is an Early Repayment Fee of 3%. We cannot port this mortgage as I became self employed a couple of years ago and I am no longer an attractive customer (my partner is employed part time so is halfway attractive.....). We have a new mortgage offer with a different lender in place, but will really resent paying about £3800 to leave this mortgage only 2 months before it ends.

Does anyone have any smart ideas about how to get around this 'fee' ? A few thoughts I've had are:

1. Loan enough for the new deposit from friends and family to get the new mortgage and keep paying the existing one for two months until it runs out.
2. Still exchanging on 1st of August but completing later and coming up with some kind of renting agreement between parties? No idea how feasible this is
3. Short term bridging loan - no idea what this would cost

Any help would be most appreciated!

ViolaLass

mrmbridges wrote: »

1. Loan borrow? enough for the new deposit from friends and family to get the new mortgage and keep paying the existing one for two months until it runs out. You can't have a mortgage on a house you don't own.
2. Still exchanging on 1st of August but completing later and coming up with some kind of renting agreement between parties? No idea how feasible this is. Ask to live there before buying it? Sellers would be crazy to do this.
3. Short term bridging loan - no idea what this would cost.

Any help would be most appreciated!

Ask to complete - and move - later.

Thrugelmir

At the outset you were aware of the contract terms when you agreed to them. You would aggrieved if the lender attempted to change their side of the bargain. As a consequence you have to live with the circumstances. Your private life is none of the lenders concern. As this is a business transaction simple as that.

mrmbridges

Hi Thrugelmir

Thanks for your reply. I don't dispute the legality of the ERF, I just don't want to pay that amount of money when we are so close to the end of our contract. When we signed up to it, we made sure we picked a mortgage that could 'port' to a new house if the occasion arose, we didn't realise that becoming self employed would give them the right to refuse this move.

Vectis

Are you sure the early redemption fee isn't on a sliding scale based on how long left for the agreement to run? Why not discuss with your current lender. As far as I recall, an early redemption fee is to cover loss of interest if you end the agreement early. It might be worth talking to your lender.

mrmbridges

Hi Vectis. I'll check again, but I'm pretty sure it's a fixed 3% (plus another small arrangement fee).

Goldiegirl

If you don't want to pay the fee, the only viable way of avoiding it is to redeem the mortgage after 30th September.

Thrugelmir

mrmbridges wrote: »

we didn't realise that becoming self employed would give them the right to refuse this move.

A common misconception is that a port is a straight transfer of a mortgage. When it isn't. Borrowers have always had to meet the lenders current criteria when applying for a new mortgage. Porting only relates to the terms and conditions i.e. interest rate.

I just don't want to pay that amount of money when we are so close to the end of our contract.

The lender has likewise borrowed the money in the money markets for a fixed term to fund your mortgage. So they'll suffer a loss if you redeem early. ERC's are set on commercial grounds. Not as a penalty aimed at the borrower.

greggymagic

Thrugelmir wrote: »

At the outset you were aware of the contract terms when you agreed to them. You would aggrieved if the lender attempted to change their side of the bargain. As a consequence you have to live with the circumstances. Your private life is none of the lenders concern. As this is a business transaction simple as that.

How does your post

a) Answer the OP's questions?

b) Constitue any sort of helpful post?

c) Contribute in any way to this thread?

Thrugelmir

greggymagic wrote: »

How does your post

a) Answer the OP's questions?

At the outset you were aware of the contract terms when you agreed to them

b) Constitue any sort of helpful post?

It's factual

c) Contribute in any way to this thread?

Again it's factual

This is your first post in some time. Why choose this one? A connection to the OP perhaps?

dimbo61

Can you check if you can pay 10% off the balance and avoid the ERC on this part and then pay the rest off later and pay the 3% ERC on the remaining balance !

Many fixed deals allow 10% overpayments each year without early repayment charges.