When do early repayment charges apply

mda07bcm

Hi there. If people can help me with my mortgage query I would be very grateful.

I purchased my first house Feb 2015. At the time I was self employed and only had 1 year of accounts as I had just left university. Getting a mortgage was difficult without 2 years of accounts which most lenders wanted but eventually Lloyds agreed a 2 year fixed rate deal if I placed a 25% deposit down. Fortunately I've always been a saver and was able to proceed with purchasing the property with this mortgage.

Now I have been working for 3 years my income has improved. This has enabled me to make some significant overpayments on my current mortgage to reduce the monthly repayments and interest. My 2 year fixed rate mortgage is finishing at the end of February 2017 and I will go onto the lenders 'Standard Variable Rate' on the 1st March 2017. Me and my partner are now quite eager to move to a bigger house as lenders are now much more happy to lend me money now I have 3 years of accounts and a track record of being able to pay back my mortgage. This issue I am aware of is that I am still locked into the 2 year fixed rate mortgage and I am reluctant to have to pay any early repayment charges.

My question is that if my current fixed rate period finishes at the end of Feb 2017 and I am on the SVR 1.3.17 do the early repayments charges apply if I was to list my house for sale before the 1.3.17. Or do they apply from the date I agree an offer on my house or is it the actual completion date if I was to sell my current house and move. I obviously want to avoid any early repayment charges if possible so if they apply only if the completion date is still in my fixed rate period I will probably try and make the completion date 1.3.17 or later. I guess if thats the case I can probably list my house for sale soon as it is unlikely I will find a buyer for my house, find the house of my dreams and complete the whole conveyancing process before 1.3.17 especially considering Christmas is in the middle of this?

Any help is much appreciated.

RhysHSCC

they will apply if you complete on the sale and redeem your mortgage before your fixed rate ends.

Is your mortgage portable? If things happen quicker then expected then that is a way to at least get ERC refunded on completion of new property. Best speaking to the mortgage lender directly to explore porting the mortgage

Thrugelmir

ERC's would apply at the date of redemption of the mortgage.

Your existing lender may consider porting your existing mortgage, i.e. transferring the existing balance and interest rate. You could then top up with another mortgage product from the lenders range to fund the purchase. This is subject to the lenders criteria. If you wanted to get the ball rolling it's a potential option available to you.

mda07bcm

So I guess the mortgage would be redeemed on the actual completion date if I was to move to a bigger house? I'm thinking about maybe listing my current house for sale in the next month or so as I can't see the whole process of finding a buyer, finding a house I want to move to and the conveyancing process being done before 1.3.17. I'm not really sure at what point the mortgage is redeemed in this process or if it is the completion date at the very end?

My mortgage is portable. I wanted to be able to go to other lenders if possible as I think I could get a better interest rate with other lenders. Like you said though if things went quicker than expected that would at least be an option.

RhysHSCC

The mortgage is redeemed on completion of the sale, as the legal charge the lender has on the property has to be removed in order for any new potential lender to apply their interest on the property title. therefore if completion happens say mid Jan then you would have to pay the ERC. You can't complete a sale at this time say and then hold off redeeming until the end of Feb.

AnotherJoe

The date you put your house on the market is irrelevant, you might not even end up selling it so it would be a bit harsh if they charged you an ERC just because it was on Rightmove !

Its an early REDEMPTION charge. If you dont redeem, or dont redeem early, there's no charge.

mda07bcm

Thanks, but the redemption only occurs on the completion date? As in the actual day you move all your stuff from one house to the other?

Thrugelmir

mda07bcm wrote: »

Thanks, but the redemption only occurs on the completion date? As in the actual day you move all your stuff from one house to the other?

In effect yes. As it's the day the mortgage on the old property is settled.

davidmcn

mda07bcm wrote: »

Thanks, but the redemption only occurs on the completion date? As in the actual day you move all your stuff from one house to the other?

You redeem when you have money to do so. You get the money from your buyer. They don't give you the money unless you're giving them the keys in return. So it all happens on the completion date.