Mortgage ERC & Overpayment Allowance

doherty81

Hi all,

Me and my ex wife are selling a property we own and is part way though a 5 year fixed rate mortgage so will be liable for early repayment charges of 3%.

The outstanding mortgage £180K but we have an overpayment allowance of £18.5K. When it comes down to pay it off would I be expecting to pay the ERC on the full £180k or the £180K - overpayment allowance of £18.5, so in effect £161.5k?

The difference is about £555 between the two values but I'm not sure which it would be based on.

Thrugelmir

Overpayments would need to be made prior to redeeming the mortgage.

BoGoF

Redeeming the mortgage when selling is not an overpayment so unless you have £18.5k spare to make an overpayment then it will be on the full balance.

Even if you do have the funds to make an overpayment you would need to check your T&Cs to see how your lender calculates the ERC

Lotak

I got caught out by this.

You have to read the Ts&Cs of your mortgage.

I think the policy is to allow overpayments up to the limit (usually 10%), but if you were to redeem within 6 months of that overpayment, they will charge you an ERC inclusive of that overpayment.
So, in your case, you'd get charged an ERC as if you didn't make the £18.5k overpayment.