ERC question

sturgeon

My Halifax mortgage has early repayment charges as follows:

3% of the amount repaid on or before 30/09/17
2% of the amount repaid on or before 30/09/18

I don't understand this. If I pay a % of the amount repaid, does this mean I pay either 3% or 2% on the mortgage repaid to date (repayment & interest) or am I misunderstanding? Alternatively do I pay this amount on the entire loan minus what i've paid to date?

kingstreet

No. If you pay a lump sum off the mortgage capital you will pay a penalty of 3% of that amount if you do it before 30/09/2017 or 2% of that amount if you do it between 30/09/2017 and 30/09/2018.

KPike

May I add, usually you pay the penalty for any overpayment above your allowance.

E.G. Mortgage of £100,000 with a 10% annual overpayment allowance with an early repayment charge of 5% in year 1.
If you paid off £20,000 in year 1, usually the charge is calculated as:

£20,000 - £10,000 (allowance), = £10,000.
£10,000 * 5% = ERC of £500

Hope this helps?