Advice on minimising mortgage early repayment penalty

Simster

I am about to move house and am looking into mortgage advice now.

My situation is a little complicated, as follows:
• We can just about buy the new house outright, but expect to spend around £70-90k on home improvements. So I wouldn’t necessarily need a new mortgage immediately, and wouldn’t need it all at once either. A draw-down facility might be more cost effective?
• My current mortgage (around £353k) is a 2 year discount rate, which expires 1st November. At that point, there is essentially no penalty to pay by shopping around.
• My house move is likely to go through around mid-September, six weeks before that deal expires, so I’ll be subject to a financial penalty as follows:
o If I keep my current mortgage, I will have to pay 2.5% on the difference between my new mortgage figure and the old one. Assuming I want the full £90k above, that amounts to £6,575. If I don’t want the new mortgage straight away, it will be £8,825!
o If I don’t keep my current mortgage, but stay with the same firm, they want 2.5% of 50% of the balance at the time of transfer. So roughly £4,412.

It seems ridiculous to me, as my monthly mortgage is around £1,800. So it would actually be cheaper to simply continue to pay a mortgage amount for the 6 weeks between mid-September (expected date of exchange) and 1st November (date where financial lock-in on my mortgage expires).

So what are my options to limit the penalty amount given that I don’t think I can hold up the chain until 1st November?

getmore4less

It is not clear what the penalty is on.

Porting all the current debt usualy eliminates the fee.

prt the lot any make a large payment in November if it more than you need.

Offer your chain £1k each side to delay.

Simster

getmore4less wrote: »

It is not clear what the penalty is on.

Porting all the current debt usualy eliminates the fee.

prt the lot any make a large payment in November if it more than you need.

Offer your chain £1k each side to delay.

Thanks for the reply.

My current mortgage is a 2 year discount. The penalty is for paying off the existing mortgage before 1st November.

What is "porting"?

I like your idea of the chain offer, if I can't port.

getmore4less

Porting is where you take the terms of your current deal to a new mortgage from the same lender.

If it is the same amount or more they should wave any penalties.

Simster

Ah in that case, there is still a penalty for porting. As I say, "If I don’t keep my current mortgage, but stay with the same firm, they want 2.5% of 50% of the balance at the time of transfer. So roughly £4,412."

getmore4less

You can't keep your current mortgage if you change house.

this looks like a port, just port more and have a lower fee.

If I keep my current mortgage, I will have to pay 2.5% on the difference between my new mortgage figure and the old one. Assuming I want the full £90k above, that amounts to £6,575. If I don’t want the new mortgage straight away, it will be £8,825!

Simster

Ah yes, of course!

That's the optimal way!

getmore4less

if the new place is cheaper you may hit a LTV limit for the port.

MPD

Simster wrote: »

If I don’t keep my current mortgage, but stay with the same firm, they want 2.5% of 50% of the balance at the time of transfer.

Wouldn't it be easier to say 1.25% of the balance?