Is ERC illegal

smorg1966

I am just about to pay of my mortgage with the sale of my house. I have extra saved cash. I have just received my mortgage redemption figure and found that the 3% ERC is on the value of the outstanding Mortgage. So far this makes sense. However, in the terms of my Mortgage i am allowed to pay of 10% without any charges, so why when i wish to pay off the mortgage totally is this 10% not automatically taken into consideration.
The Figures are =- 50800 Outstanding Mortgage
ERC 1524 E.G. 3%
However if the 10% allowance was automatically taken of the the figures would be
45600 Outstanding Mortgage
ERC should be1368.
I am not concerned because as i have stated i have the saved cash. However, if i am paying off the mortgage using the funds from the sale of the house, then surely the mortgage company are not complying with there own rules off allowing me 10% without any ERC.
Is this something that all persons paying off mortgages should be made aware of. I have a small mortgage, but if you look at the total mortgages redeemed throughout the year then the mortgage companies must be making millions of extra pounds.

BoGoF

If people read what they were signing up to when taking out a fixed term mortgage then they should be aware.

To answer your question, not illegal

amnblog

Ordinarily lenders will build in the benefit of the over payment allowance into the redemption figure.

Questioning legality is a bit strong and a quick phone call will probably establish that your early repayment bill will drop by £153

dimbo61

If you have £5080 spare you could just pay that off the mortgage now !
Then when you want to pay off the rest of the mortgage you only pay ERC,s on 90%

dunstonh

Is ERC illegal

Of course its not.

However, in the terms of my Mortgage i am allowed to pay of 10% without any charges, so why when i wish to pay off the mortgage totally is this 10% not automatically taken into consideration.

An overpayment is different to redemption. Some may include the overpayment allowance. Others may not. You would need to look at their T&C.

minimike2

This question came up recently.

ERC and Overpayment allowances are NOT the same thing.

Some lenders may allow it, many will not.

To get around it is very simple. Overpay by 10% as a lump sum. Then request a redemption statement. 3% is then on 90% of what the balance was. Simple.

koexelek

smorg1966 wrote: »

I have a small mortgage, but if you look at the total mortgages redeemed throughout the year then the mortgage companies must be making millions of extra pounds.

As if a lender would EVER be looking to make extra money out of their borrowers in any shape or form they can:o

They got told off a few years back because their deeds release fees were too high, so a lot of them just doubled it and called it something else instead :cool:

You could do what minimike2 says, but you'd have to pay that 10% from savings, not house sale proceeds to make it work

davidmcn

koexelek wrote: »

You could do what minimike2 says, but you'd have to pay that 10% from savings, not house sale proceeds to make it work

Or get your solicitor to pay 10% one day and 90% the next...