Early Repayment Charges - Any Hope of Avoiding Them

oneaves2005

Hi All,

I am fairly sure I know the answer to this but...... Our 2 year fixed mortgage term ends on 31st April this year, I stupidly assumed the fixed period was 2 years from the date we arranged the mortgage which would have been November....... We have found a new house that we like and have had an offer accepted, it is likely that we will be moving around the middle of March.

We have a mortgage offer in place with another lender (Barclays) who is has way better rates than our current lender (Lloyds) so it's really not worth porting our current mortgage.

Our early repayment charge is 2% which equates to around £1000, it seems mad we will have to pay this when the bank will be losing out on one or possibly two payments in which we pay around £120 interest.....

I don't think we can do anything to delay the completion date as the vendor is after a quick sale and is already getting impatient.

Any ideas? I assume we will just have to pay it but it does seem unreasonable....

dunstonh

Our early repayment charge is 2% which equates to around £1000, it seems mad we will have to pay this when the bank will be losing out on one or possibly two payments in which we pay around £120 interest.....

They are not losing out as you only pay when you borrow the money. If you are not borrowing from them then they are getting their returns elsewhere.

I assume we will just have to pay it but it does seem unreasonable....

When you understand the funding of mortgage deals, you wouldn't consider it unreasonable. By paying the mortgage off early, the bank has to decide to finance any differences or pay fees itself to the source of the funds for early repayment.

owen_money

oneaves2005 wrote: »

Hi All,

I am fairly sure I know the answer to this but...... Our 2 year fixed mortgage term ends on 31st April this year,

Are you sure its the 31st April?

oneaves2005

Fairly sure, although I will check this evening. Definitely April... will check it's the 30th (rather than 31st!) or 1st.

HaveAGo

That went over your head.....31st April does not exist

owen_money

HaveAGo wrote: »

That went over your head.....31st April does not exist

And some fell on stony ground

kingstreet

Fixed rates are arranged with third parties who provide what's known as a "rate swap." Although you may have a Lloyds mortgage it isn't Lloyds you have to compensate for breaking the agreement early. It's the third party.

Regardless of how long or how many payments remain, the end date is absolute. Break the deal early, you pay. Don't and you won't.

BTW some products are fixed for X months from completion and others are fixed until DD/MM/YYYY. Ensure you buy what you need rather than what you think you've heard/seen.