Mortgage ERC & Overpayment Allowance

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.

Replies

  • ThrugelmirThrugelmir Forumite
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    Overpayments would need to be made prior to redeeming the mortgage.
  • BoGoFBoGoF Forumite
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    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
  • LotakLotak Forumite
    96 Posts
    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.
    Current Debt (excluding mortgage) - £7,020
    Reducing £450/ month.
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