avoid early repayment charges

nickG

Hi guys,

The first question for me but I'm sure it must have been asked before.... I just can't find it.
So I'm selling a house but I renewed the 2yr fixed term a few months ago.

What I'm wondering is.... is it possible to sell the house but not pay off the mortgage?
ie; perhaps pay off the majority of it but not all and avoid the early repayment charge? The mortgage is interest only so even if I paid the monthly repayment for the next year, it would still be cheaper than having to pay the early repayment charge!

AnotherJoe

No it is not possible.
You could look at "porting" the mortgage (or even just getting new mortgage) with the same lender, they may then waive the ERC. You'll have to ask them.

nickG

Yeah, I assumed they would have thought of everything to get your money and keep you from squeezing out of a loophole!.
I cant port it or get a new mortgage because.... well, I don't need one. I'm trying to generally better my financial situation and become debt free. I just hate large charges! As do us all!

BoGoF

Hardly a loophole when you agreed to it when you took out the mortgage.

AnotherJoe

Some mortgages like this there is "sort of" a loophole in that you can pay a chunk off and the ERC is calculated on what is left.
Eg extreme example, you owe £100k, you pay off £99k, then redeem mortgage paying ERC on £1k.
You wouldn't be to do that coincident with house sale though you'd need to do it first perhaps witha short term loan. And not all mortgages will allow that most will have a maximum overpayment of say 10% a year.
However i had a thought. You said "I cant port it or get a new mortgage because.... well, I don't need one. I'm trying to generally better my financial situation and become debt free" so are you downsizing? How about you do port the mortgage, you now have a big chunk of cash as well, and you continue paying the mortgage for two years and then pay it off with the cash once teh ERC period has ended? That would work if two years interest is less than the ERC.

Edi81

The mortgage provider isn!!!8217;t charging a fee just because they can.
They have entered into a swap which would have a fee for them.
This is why when fixing you need to be pretty certain that you will have the mortgage for the duration of the fix.

nickG

I'm not downsizing.

I've got two houses currently.
I'm selling one to take the equity and then buy some land (theoretically). At which time, the plan is to chase planning for a while and hopefully build my own house mortgage free.

So I'll still have one house but I've also recently renewed the mortgage on that one too.