Avoiding ERC, even if profit made from selling flat sitting in the bank? 31 August 2017 at 6:28AM in Mortgages & endowments 6 replies 690 views

librarian83

Hi there

I'm still on my introductory fixed rate with my mortgage provider but I want to sell so that I can buy a house with my partner. I'm kicking myself a bit that I didn't choose a shorter introductory fixed rate but it is what it is!
I have about 60,000 left on my mortgage so a sale of my flat would mean I could pay it off. But-am I obliged to pay the amount off if the sale of the flat would leave me in a position to do so?
I ask this because there is a chance that me and my partner could buy a property outright with the amount he has saved and the money from the sale of my flat, and therefore we wouldn't need the mortgage I have and an early repayment charge on 60,000 would be just about manageable. Or we could get a slightly bigger house to make use of the fixed rate mortgage period and avoid an early repayment charge?
I hope his all makes sense..Thank you!

Edi81

How long have you got? What is the ERC %?

Your paperwork from the mortgage company will confirm if you can port the rate to another property.

silvercar

You could port the mortgage over (if allowed) and delay repayment until the end of your tie-in. You need to do the maths on whether the costs (application fee, survey, legals) would be higher or lower than the redemption fees. You don't have to get the bigger house.

ACG

You will be obliged to pay it on completion of the sale.
The solicitors will ask for a redemption figure which will include the balance on the expected completion date, the ERCs and the deeds release fee (usually around £100).

You could port your mortgage over to the new property until the deal finishes and avoid the ERC. You would probably need to add your partner to the mortgage.

librarian83

Thank you for your help! Next year (when we are looking to buy) I will still have 4 years left on my fixed rate, so it'll be 4% of just under £60,000. The paperwork says I am able to port the mortgage to another property.
Perhaps 4% of £60,000 ERC would be less than the interest accrued (fixed rate is 2.19?)

Thank you for your patience

ACG

You may also find the percentage rate drops year on year. So it will maybe be 3% and on a smaller balance.

silvercar

librarian83 wrote: »

Thank you for your help! Next year (when we are looking to buy) I will still have 4 years left on my fixed rate, so it'll be 4% of just under £60,000. The paperwork says I am able to port the mortgage to another property.
Perhaps 4% of £60,000 ERC would be less than the interest accrued (fixed rate is 2.19?)

Thank you for your patience

£2,400 is the ERC.

4 years of interest is £5,256. Plus the application fee, valuation fee, legals....