Trying to avoid ERC on Nationwide Mortgage

Legacy_user

Hi All

My husband and I took out a five year fix with Nationwide some 4 years and 8 months ago.

Unexpectedly we had to relocate for my husband's job a few months back so had to put our house on the market. It is now SSTC and awaiting exchange of contracts and completion but we are in the frustrating position that by 1st November 2018, we would be eligible to apply for a new Nationwide product because we would be within 3 months of our current fixed term mortgage ending.

My thought is that if we could hopefully delay completing until we have switched to a new mortgage product that does not have an ERC, such as tracker deal, and then pretty much redeem it days or weeks later when our sale completed, we would be able to avoid paying the ERC of nearly £8,000 on our current mortgage.

Has anyone ever done this? Is it even possible or would Nationwide realise what I had done and make me pay the ERC anyway? Or does anyone have any better ideas?! It is so frustrating to pay so much when we have had to move for job purposes and we are so close to our fixed term mortgage end date....

Thrugelmir

Are you unable to port the mortgage to a new property?

System

We don't want to port unfortunately as emigrating in the next couple of years and with Brexit and all the doom and gloom happening, we don't think it is wise to buy (with all the associated costs) and then subsequently sell again (with all the associated costs) only a couple of years later when we can just rent for the remaining time in the UK.

kingstreet

So your ERC ends in Jan/Feb and you want to see if you can do a rate swap to an ERC-free tracker when you're within three months of the expiry, then pay it off to save £8k?

No idea. Some questions are so lender-specific I don't really see the point of posting them on a general mortgage forum. Hoping you'll get someone to reply who did it, I guess...?

tlc678910

Hi,
I just had a look at the Nationwide website and it seems very clear that you can switch to a new product within 3 months of your old one ending without paying an early repayment charge - i was checking they didn't mean arrange 3 months ahead but then it swaps at the end of the term - but the website is quite clear.

So if you swap to a new product with no ERC I can't really see how they could argue it. Get confirmation that the product switch has taken place and not just been arranged.

It would be worth getting confirmation from Nationwide but if they say they will still charge the fee ask where this is explained on the website/ in their terms (as if you switch product you expect the conditions of the new product).

We have our mortgage with Nationwide and I have found them a fair lender so I would guess that if you have confirmation you have switched product to one with no ERC then you will be ok. If you are charged in this case then challenge it. If early repayment charges still apply for the 3 months then this should be made clear.

Tlc

nickcrax

You should complain on the basis that the ERC is not a reasonable charge based on the loss incurred by Nationwide in you terminating your mortgage early. I have done this successfully with another mirtgage company by complaining and the escalating through the Financial Ombudsman.

See this link. The key part is that the charge is not reasonable. This is almost indefendable given the Bank of England cheap lending stimulus over the last few years. I am about to do the same on the 7% ERC on my -0 year fix and look to switch to another 10 year fix at about 0.8% a year saving me over £3k a year in interest

It won’t let me post the link but you can find it on the financial ombudsman website home - publications - online technical resource - mortgages: early repayment charges

Just pay it if you have to and claim back afterwards

Penelopa.Pitstop

Just note that when you switch to new product, you have to choose new product start date and it's usually first day of next month. So if you apply on 1st of November, you may have to wait until 1st of December to be on new product and repay after that day.

It's certainly worth waiting if you can avoid £8K ERC.

Edi81

Please be wary of what nick has said.

Most here would say that the ERC is not unfair.

describes

Yes this is fine.

I have done this with Nationwide mortgage before. Moved onto a tracker for 1st of the next month and then redeemed technically before the 2 years. I also received cashback for the product switch.

somethingcorporate

As per the above, I have just moved two trackers with NW 3 months before they are due to expire. You can pick that they start the (first of) the following month. It couldnt be easier.

mouthscradle

Would be very interested to hear whether anyone has done this successfully with First Direct!