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Avoiding early repayment charge

edited 30 November -1 at 1:00AM in Mortgage-Free Wannabe
9 replies 945 views
ThadeusThadeus Forumite
5 Posts
edited 30 November -1 at 1:00AM in Mortgage-Free Wannabe
Hi there

I am about to be in the position to clear my mortgage however I have £6k in ERC.

Is there any way to avoid it?

Thank you

Replies

  • UrbanshyneUrbanshyne Forumite
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    Wait until the fixed period of your mortgage expires.
    Neither a borrower or lender be; for loan oft loses both itself and friend.
  • ThadeusThadeus Forumite
    5 Posts
    My fixed period is until 2021 and I have 10 years left
  • BrowntoaBrowntoa Forumite, Board Guide
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    Then leave a minimal outstanding amount until then
    Links in my signature currently broken
    I'm the Board Guide of the ,Telephones, Pensions , Shop Don't drop ,over 50's , Boost your income and Discount Code boards which means I volunteer to help get your forum questions answered and keep the forum runnning smoothly .However, please remember, board guides don't read every post. If you spot an inappropriate or illegal post please report it to [email protected] Any views are mine and not the official line of MoneySavingExpert.[
  • ThadeusThadeus Forumite
    5 Posts
    I am allowed to over pay by 10% each year.

    Would i not expect fees if i pay more than that?
  • UrbanshyneUrbanshyne Forumite
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    Yeah, you would expect fees if you paid over the 10% allowance.

    I would probably bank the money, pay up to your 10% allowance for the next 3 years, then pay off the balance in full once the fixed period is up.

    Though, I would only do this if it were cheaper than paying £6000 now. It's likely to be, but it would be worth checking.
    Neither a borrower or lender be; for loan oft loses both itself and friend.
  • ThadeusThadeus Forumite
    5 Posts
    It turns out i would be paying IRO £7.5k of interest over the next 29 repayments until my fixed rate expires. So i would be better to just pay the ERC?
  • FloppyDiskFloppyDisk Forumite
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    But if you pay the 10% every year does that drop the 7.5k to below your ERC?

    Mortgage Apr 18 £417,894 BTL Mar 18 £162,857
    Mortgage now --- £385,174 BTL now --- £161,774
  • UrbanshyneUrbanshyne Forumite
    105 Posts
    Third Anniversary 100 Posts Name Dropper
    Have you calculated the mortgage interest on a constant mortgage balance for 3 years or as a declining balance over time?

    You're also going to have a cash balance equivalent to the remaining mortgage balance which has the potential to return x% over 3 years. Don't forget that.

    It would help to have the figures and rates.
    Neither a borrower or lender be; for loan oft loses both itself and friend.
  • ThrugelmirThrugelmir Forumite
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    What rate of interest are you paying?
    It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong." — George Soros
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