Redemption Penalty rip off

compact1

I don't know if anyone has any advice on this. I hope so.
I have a sale agreed on my house. The only proviso being that the sellers, if completion is reached in time, they want to be in for christmas. I'm on a 5 year fixed rate deal with the Bank of Ireland, due to expire at the end of February 2008. The redemption penalties on the mortgage are 5%. I rang up their so called "customer helpline" today, to see if i could pay them the remaining 2 mortgage payments, which run out at around £2100. They won't have it, and are going to charge me nearly £9000. Obviously, I'll take it to the financial Ombudsman. Any ideas would be well received.

silvercar

A mortgage has to be secured on a property. When you complete a sale the mortgage has to be redeemed so that the charge on the property is removed (and the buyers charge registered). Without a property on which to secure the mortgage you have no option to redeem and therefore pay any charges for doing so before the agreed date.

The only way round it would be if you were buying a new place and the mortgage was portable ie BOI allowed you to take the mortgage to the new property under existing terms. The new mortgage would involve a new application/ survey/ underwriting etc.

I doubt you would get anywhere with the FO as the first condition of any mortgage is that it is secured on a the property, you no longer owning the property would mean you fail that first condition.

Of course, BOI could be lenient, but that would be at their discretion.

Are you buying a new place? If you complete within the next few months lenders often allow the charge to be refunded on the new mortgage.

Option B would be to go slow on the legals to sell your home or agree with your buyers to complete in Feb, even if you exchange now for peace of mind.

tishybabe

We are in the same situation where our Early Redemption Penalty will be £4500 as we had a 2 years fixed but we talk to the building society and if we take a new mortgage with them for our new property within 6 months they'll refund £3000. Better than nothing

Strapped

Sounds like you have no option other than exchange now and complete 1 March. Sure, your buyers would like to be in for Christmas, but if they pulled out and started looking again, that wouldn't happen would it?

Unless you ARE moving somewhere where you'll need a mortgage, in which case I agree with the posters above, that you could approach BOI re. porting your existing mortgage to the new property.

SquatNow

You could exchange now and complete on the 1st of march but still let the new people move in.

Agree a 3 month rental agreement for nominal rent.

macaque_2

As problem this is out of my league.

For what its worth I think this is disgusting. It is not as if they are going to suffer financial loss if you redeemed 2 months early. They could also allow you to keep the loan until the due date and have it secured in some another way. Alternatively they could accept a penalty that is commensurate to the life left in the agreement. By exercising their rights in this way, this is clearly an unfair contract (even if the law dosn't see it this way). Unfortunately the legal system in the country is a bully. They target individuals and small companies. How many convictions did we see for various miss selling scandals? None! Their protection of the consumer stops at the city boundaries.

Good luck with the ombudsman.

merlinthehappypig

As much as I sympathise with your problem, I cannot believe that you will get anywhere with a case to the ombudsman and I think it would be wrong for anyone encourage to let you think otherwise.

The terms of the mortgage would have been quite clear. You got a fixed rate and presumably have benefitted well from this as interest rates have risen. The bank were taking a financial risk by doing this and tied you into a fixed period with a penalty if you redeemed the mortgage early.

This is a normal situation with any bank where the mortgage has been agreed at a preferential rate and you simply don't have a leg to stand on in arguing against this. You knew the terms of the mortgage when you took it out and should have arranged your sale and purchase to tie in with this. That you didn't is no-one's fault, but your own.

I'm sorry if this comes across as a little harsh. I'm not condoning these penalty charges, simply pointing out that you have no case and should be concerning yourself with sorting the problem out, not complaining about the bank.

A number of possible solutions have been put forward. To me the obvious one is to sell your house as agreed and rent for six months or stay in a hotel as squatnow suggests. Even if you have to leave the rented property early, the loss of rent will be nowhere near the £9000 penalty charge.

dmg24

SquatNow wrote: »

You could exchange now and complete on the 1st of march but still let the new people move in.

Agree a 3 month rental agreement for nominal rent.

What would the buyers secure their mortgage on in the meantime?

lynnexxxo

macaque wrote: »

As problem this is out of my league.

For what its worth I think this is disgusting. It is not as if they are going to suffer financial loss if you redeemed 2 months early. They could also allow you to keep the loan until the due date and have it secured in some another way. Alternatively they could accept a penalty that is commensurate to the life left in the agreement. By exercising their rights in this way, this is clearly an unfair contract (even if the law dosn't see it this way). Unfortunately the legal system in the country is a bully. They target individuals and small companies. How many convictions did we see for various miss selling scandals? None! Their protection of the consumer stops at the city boundaries.

Good luck with the ombudsman.

I disagree. You sign a mortgage deal which clearly states the penalties for an early redemption. The OP should have checked if they had any early redemption fees before agreeing to sell.

Sorry, OP, that sounds harsh, could you explain to your sellers your problem and possibly even offer a slight price reduction.

budget_counsellor_shaz

IMHO write a polite carefully worded polite letter. Include the amount that you have already paid them over the last 58 months. Explain that you are happy to pay the next 2 months mortgage payments as you are also aware that you owe them this. You will need to also tell them that you have buyers for your property that would like to complete before Christmas.

I think they will let you pay the 2 months a politely worded letter should help.

If they do not I'd send a letter of complaint to their head office and a copy to Watchdog. Banks have had a lot of bad press recently.

All the best with whatever you decide to do.

Shaz;)

Doozergirl

I wonder when the OP accepted the offer and how many houses the chain consists of.

Christmas completion I would think is nigh on impossible even with no chain to speak of, if the offer has only just been accepted. If you explain that you have £9000 worth of fees if you complete before February, I am sure they will be understanding - it's not as if you are doing this deliberately - and anyway, what other house are they realistically going to be able to move into before Christmas? People often seem to want the unacheivable when it comes to homebuying. Are they FTBs?

I've just agreed to buy a house with exchange when we are ready and completion in March. I'm at the bottom of the chain (I said I'd never do it again!) and was a bit nervous asking but everyone knows why and everyone is happy with that.

Also, I do agree that the fixed term is in return for a discounted deal. It's not a simple rip off, though with 2 months left to go, it's a right pain, no denial. Kicking up a stink won't help - it will just stress you out.