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Overpay to reduce penalty

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I've got a 4% mortgage I'm going to exit when I move homes in the near future. I have to pay 3% of outstanding as early repayment fine.

If I over pay 10% I'm allowed to before I exit, I'll reduce the total amount owed and therefore my 3% penalty - right? I have the 10% in my account now.
Just have a little faith

Comments

  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    Overpaying the mortgage will reduce the ERC penalty. As it's calculated on the amount you owe at the point of redemption.

    With an interest rate of 4%. Beneficial to overpay your mortgage in any event.

    When you move house porting your existing mortgage may be an option. So possible to avoid paying an ERC and letting your mortgage run it's product term through to expiry.
  • lky2k23
    lky2k23 Posts: 302 Forumite
    Part of the Furniture 100 Posts Combo Breaker
    Thrugelmir wrote: »
    Overpaying the mortgage will reduce the ERC penalty. As it's calculated on the amount you owe at the point of redemption.

    With an interest rate of 4%. Beneficial to overpay your mortgage in any event.

    When you move house porting your existing mortgage may be an option. So possible to avoid paying an ERC and letting your mortgage run it's product term through to expiry.

    Unfortunately not able to port due to working contract change.

    Thanks. I'm unsure why the couple of mortgage experts didn't suggest overpaying with my new extra deposit.
    Just have a little faith
  • amnblog
    amnblog Posts: 12,728 Forumite
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    edited 19 October 2016 at 9:19PM
    Like many things with Lenders it's rarely that simple.

    Check the notes with this Halifax example

    http://www.halifax.co.uk/mortgages/mortgage-information/early-repayment-charges/

    Also this Barclays one

    https://www.help.barclays.co.uk/faq/mortgages/repayments-rates/overpayment-charge.html

    Check with your own lender
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
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