Adding Early Repayment Charge to New Mortgage

binky123

Thrugelmir wrote: »

The mortgage is the legal charge placed on your property to secure the debt. The debt owed is a loan. All you are doing is fixing the interest paid on the loan for a period of time by means of a product.

So why isn't it a remortgage? And when the usual options are first time buyers, moving house, or remortgaging, what can I select?

betmunch

binky123 wrote: »

So why isn't it a remortgage? And when the usual options are first time buyers, moving house, or remortgaging, what can I select?

Because its not a new mortgage if you're staying with your current lender, its changing the product of the mortgage you already have.

Select the option for existing customers wanting to take a new deal, or similar wording.

If you're looking at other lenders then choose remortgage as you are paying back your old mortgage and taking a new one

getmore4less

binky123 wrote: »

The calculations are right. It's not quite as clear cut as I mentioned though. I can either overpay on the new rate with the £120 a month saved (ie. pay per month the same as I do now) and be a couple of grand better off in 2 years, or pocket the £120 a month and only be slightly worse off after 2 years in terms of remaining balance (but richer in savings or life enjoyment!). Either way it makes me better off financially and after a short period of time. I'm on 3.99% and I can now get 2.54%.

for 1.35% rate difference and £120 change in payment that seems unlikley with a £4k fee

how much is your current payment and amount borrowed.

grabbing a sample £150k over 30years £715pm £4k fee
after 2 years there is only £200 in it(for the better).

binky123

getmore4less wrote: »

for 1.35% rate difference and £120 change in payment that seems unlikley with a £4k fee

how much is your current payment and amount borrowed.

grabbing a sample £150k over 30years £715pm £4k fee
after 2 years there is only £200 in it(for the better).

Not really comfortable in getting down to that level of financial detail but trust me, I've tried numerous online calculators with full amortisation breakdowns. Even the simple "ditch and switch" calculator on this website said I should switch if I found better than something like 2.88%.

getmore4less

Bigger mortgage shorter term will start to save more than the £200

£190k over 20y its closer to £1200 saving.


(from the info given it will be possible to work out anyway the conditions make it fall into quite a narrow window)

binky123

You probably could but for what purpose? The benefits for me are:

- £120 of my monthly payments become optional
- If I choose to overpay with this saving my break even point comes before the end of my current fixed period anyway
- I won't have to remortgage for another 5 years, rather than in 2 years when available rates are likely to be higher

I just need to be clear how to get the new deal to cover my ERC rather than dent my savings.

getmore4less

Change lender.

binky123

I started an online form with a new lender, but the box for the amount I want to borrow is called "outstanding mortgage balance". How can I just add £4k to that and not be lying? It doesn't mention about including fees or charges for redemption.

chappers

That's not how it will work out, when you request the redemption figure on your existing mortgage it will include the ERC and that is how much your new lender will then send to your existing lender to redeem your current mortgage.
This is standard practice and a common occurrence, you won't be lying.
Provided the new figure fits the lenders criteria with regards to LTV and affordability you should be fine.

binky123

Thanks chappers, that was the clear explanation I was looking for. Makes sense now. I'll ask HSBC for my redemption figure and take it from there.