Possible to leave £10 in your mortgage to avoid ERC

cbrpaul

As per title, is there any rule to say how much must be left on your outstanding mortgage to avoid ERC, I can make penalty free unlimited over payments.


I have a couple of years or so left on a 5 year fixed rate, but I can pay the mortgage off before then if I choose too, however I will get a few £1000 ERC for doing so ,


Can I leave say £1000 in the mortgage left to pay,and pay £5 a month for last few years , just to avoid a ERC ?

dunstonh

You will avoid the ERC on £10 if you do that. However, you will pay the ERC against the rest of the debt you have reduced.

ACG

I would normally agree with Dunston, however I did come across a Mortgage the other day where you could overpay by as much as you wanted without any ERC however if you cleared the Mortgage in full there would be an ERC.

You need to check the wording of your Mortgage offer - section 10 or 11 I think.

AnotherJoe

dunstonh wrote: »

You will avoid the ERC on £10 if you do that. However, you will pay the ERC against the rest of the debt you have reduced.

Why would that be if he can make unlimited overpayments?

Paul, ask your lender about this. Get it in writing if you can. Looks like a massive loophole at face value !

stator

Seems very odd to have such a huge loophole in a mortgage agreement. Are you sure overpayments are really unlimited?

cbrpaul

thanks for the replies ,


As said , I can make unlimited and any amounts of over payments, and as long as I don't clear the mortgage I don't pay ERC.


I have already in the past paid large sums off the mortgage with no penalties

cbrpaul

taken from my mortgage agreement,


An Early Repayment Charge is a charge you may have to pay if you choose to fully repay your mortgage early.
Early Repayment Charges do not apply to first direct mortgages if you choose to make overpayments or lump sum payments to your mortgage.
If you take a fixed rate mortgage and you repay the whole of your mortgage during the fixed rate period an Early Repayment Charge will apply. This charge is calculated at 3% of the original mortgage amount during first year of the fixed rate period and 2% of the original mortgage amount if the mortgage is closed in any subsequent year during the fixed rate period. If you choose to repay your mortgage after the fixed rate period has ended, no Early Repayment Charge will apply.
The amount of any Early Repayment Charge will be displayed on both your Key Facts Illustration and Mortgage Offer, which you will receive should you decide to progress with a mortgage application.

AnotherJoe

Looks pretty clear then, as you say leave a minimal amount. I presume you arent looking to move and your motive is simply to get rid of your mortgage?

cbrpaul

Thanks Joe,


Unlimited penalty free over payments was a main reason in choosing FD for my mortgage.


I look forward to a mortgage balance of £1000 and paying £10 a month for the last few years to avoid £1000,s of ERC

dimbo61

Even in a 5 year fixed deal we were allowed unlimited overpayments as long as we did not clear the mortgage within the fixed period.
Offset mortgage with YBS

Thrugelmir

cbrpaul wrote: »

taken from my mortgage agreement,


An Early Repayment Charge is a charge you may have to pay if you choose to fully repay your mortgage early.

Early Repayment Charges do not apply to first direct mortgages if you choose to make overpayments or lump sum payments to your mortgage.

If you take a fixed rate mortgage and you repay the whole of your mortgage during the fixed rate period an Early Repayment Charge will apply. This charge is calculated at 3% of the original mortgage amount during first year of the fixed rate period and 2% of the original mortgage amount if the mortgage is closed in any subsequent year during the fixed rate period. If you choose to repay your mortgage after the fixed rate period has ended, no Early Repayment Charge will apply.

The amount of any Early Repayment Charge will be displayed on both your Key Facts Illustration and Mortgage Offer, which you will receive should you decide to progress with a mortgage application.

Where does it say unlimited?