Early repayments of mortgages

OPENSPACES

I am trying to sort out my son's financial mess. He has two houses both mortgaged up to the hilt. The early repayment facility seems to be restricted to an extra 10% of the agreed repayment criteria each year. Am I correct in saying that you usually have an ability to agree larger repayments but that they would be subject to a fee? Is that fee usually a one off and what is it typically? It seems that there is little incentive to encourage early repayment of mortgages which seems crazy in a situation where personal spending is too high. I would appreciate advice on the best way to go about negotiating higher repayments with a lender

[Deleted User]

It will be the ERC specified in the terms of each mortgage.

It almost certainly won't be negotiable.

beanielou

There will be a fee I think.
Best to speak to each lender & take it from there I think.

copperclock

OPENSPACES wrote: »

I am trying to sort out my son's financial mess. He has two houses both mortgaged up to the hilt. The early repayment facility seems to be restricted to an extra 10% of the agreed repayment criteria each year. Am I correct in saying that you usually have an ability to agree larger repayments but that they would be subject to a fee? Is that fee usually a one off and what is it typically? It seems that there is little incentive to encourage early repayment of mortgages which seems crazy in a situation where personal spending is too high. I would appreciate advice on the best way to go about negotiating higher repayments with a lender

The longer the mortgage, the more money the banks make. Why would they want to actively encourage overpayment?

AnotherJoe

OPENSPACES wrote: »

I am trying to sort out my son's financial mess. He has two houses both mortgaged up to the hilt. The early repayment facility seems to be restricted to an extra 10% of the agreed repayment criteria each year. Am I correct in saying that you usually have an ability to agree larger repayments but that they would be subject to a fee?

Not really. Usually theres a set fee as a % of the amount overpaid once you've breached the overpayment limit.

Is that fee usually a one off and what is it typically? It seems that there is little incentive to encourage early repayment of mortgages which seems crazy in a situation where personal spending is too high. I would appreciate advice on the best way to go about negotiating higher repayments with a lender

The money they lent to him has a cost to them. They calculated that cost against the money he will pay in interest. If they just let him pay it off whenever he wanted, it would likely cost them money and they'd make a loss.

A mortgage where he could pay it off at any time without penalty would have a higher interest rate. He would have selected a lower rate with the quid pro quo being an ERC. You are wanting to unilaterally break that agreement.

There are calculators all over the place including this website which will tell you the trade off between ERC and cheaper payments over the long term.