Mortgage Redemption Penalty

AEROC

In April 2002 I signed up for a fixed rate for 5 years on my mortgage of £116,000 with Bank of Ireland. My circumstances have changed and I am selling my property and plan to pay off my mortgage. I wrote to BOI asking about the early redemption charges and am informed that I currently owe £106,674.91 but will end up paying £113,030.65. Has anyone any advice on how I can reduce this hefty penalty on a mortgage redemption?

MarkyMarkD

Don't redeem the mortgage. If you have to sell one house and buy another, "port" the mortgage to the new property and the penalty will almost certainly be waived. If you are selling up and choosing to rent, keep the original property and rent that out, whilst the penalty remains in force (with the lender's permission, as that's required).

You won't get a penalty like that waived - I know it's easy to be wise after the event, but you shouldn't have bought something with a 5 year tie unless you had some certainty about your circumstances.

Scott

When porting, your new mortgage will have to be the same or greater than the mortgage you currently have, or you'll still need to pay a pro rata fee on the difference between the amounts, or in some cases, the whole thing.

Ticklemouse

When we moved 3 years ago, we were 3 years into a 5 year tied in £101k mortgage with the Chelsea BS. We were noving north, so didn't need this size mortgage. It cost us just over £5k to get out of it, but the Chelsea did say that if we took out another mortgage with them within 6 months, we would get our money back. Thus, within 6 months of moving we went back to them, took out a £25k mortgage (smallest they would do) with no tie in period, got the redemption penalty back and paid off the mortage. The fees came in at a couple of hundred, but cheaper than losing over £5k

AEROC

Thank you for your response.

johannamse

Hey Ticklemouse - did they take the £5000 when you redeemed the mortgage and then pay it back to you when you got the other mortgage?

MarkyMarkD

I think that's what Tickle actually said. I'm sure it's what happened, in any case.

The Chelsea thing illustrates how daft building societies can be, IMHO. I have no doubt BoI wouldn't fall for that one.

Michel_Z.

Conditions & terms of contract should give you an answer here: that there is a penalty looks to me obvious because you stopped the morgage within the timeframe. If you can lower the penalty, to be honest I doubt it! Again check contract and see what it is exactly telling you overthere. When this is not clear, I suggest to contact legal advisor.

payless

Ticklemouse- yes in the past there were many loopholes- most have been closed

remember years back a major player had a 5% cashback deal/ 5yr SVR tie and the conditions read that the penalty was waived if someone moved and took out a new mortgage with them- on any new product -no mention a tie. A few people were known to swap their mortgage onto this deal just before they put house on the market, then were happy to take a ( no tie) new deal from this lender for their next house !

Ticklemouse

That's right johanna. It cost us just over £106k to pay it back. When the 'new' mortgage arrived, we got a cheque for £25k then another one for the penalty amount. Paid back £15k straight away and used the rest of the £10k towards a new car as old one went capput. Paid that back within the year anyway. I'm sure they have closed these loopholes now, but there may still be a few people out there who have these mortgages they are tied into.