Early Redemption Charge

MusicLover

Hi

I realise that I'm grasping at straws here, but any advice would be much appreciated.

I have one year remaining of a 5 year fixed rate mortgage with Britannia Building Society. There is approximately £104,000 outstanding on the mortgage. I am currently in the process of selling the property as I am moving in with my partner.

I have received a Mortgage Redemption Quotation from Britannia detailing that I will be required to pay an early repayment charge of nearly £5,000 in accordance with my Offer of Advance.

The Offer of Advance dated 2003 states "We will charge an early repayment fee calculated on our standard variable mortgage rate which applies at that time on the amount that you repay. The early repayment fee will be:- In the first 5 years of your mortgage - 240 days interest."

My fixed rate is 4.64%. I pay under £8,000 in mortgage payments (capital and interest) per year. Therefore, it it eye watering to have to pay 240 days interest at their current standard variable rate.

I notice that Britannia have different terms and conditions on their current 5 year fixed rate. This only charges 1% on the amount that you repay early in Year 5 which seems much more reasonable.

Whilst I understand that Britannia have to make an early repayment charge, nearly £5,000 does seem a bit steep.

I realise that I will most likely have to pay up and put it down to experience. Afterall, I did foolishly sign up to these terms and conditions!!??!! However, any words of wisdom would be gratefully received as soon as possible. The property is being sold to first time buyers and therefore the conveyancing is whizzing along.

Many thanks for your time.

dmg24

I realise that I will most likely have to pay up and put it down to experience. Afterall, I did foolishly sign up to these terms and conditions!!??!! However, any words of wisdom would be gratefully received as soon as possible. The property is being sold to first time buyers and therefore the conveyancing is whizzing along.

That is correct.

Welcome to MSE x

plane_boy2000

Sorry, and I think that you already know the answer to this, but you will have to pay. Its a contract and you signed up to those terms. You mention that your fixed rate is 4.64% so you are already doing well out of them give that the current BOE base rate is 5.75%.

I also imagine that the housing market will soften a little in the coming months so if you have a buyer and things are progressing quickly I would be reluctant to stop anything to save 5K - you may lose that on the house if you wait much longer anyway.

You could always try giving them a call and telling them that you feel the charge is a little high - I doubt you will get anywhere, but for the cost of a call you have nothing to lose!

dunstonh

Whilst I understand that Britannia have to make an early repayment charge, nearly £5,000 does seem a bit steep.

It helps if you know how fixed rate mortgages are funded.

Afterall, I did foolishly sign up to these terms and conditions!!??!!

Probably not foolishly. Your solicitor would have pointed out the tie in period and penalties and you have benefited from a very low rate.

Back on to fixed rate mortgages... In simple terms, the money made available on a fixed rate mortgage to you is backed by investors who have entered into a contract as well. So, if you pay back the mortgage early, the lender still has to pay the investors or break the contract with them and pay a penalty.

dmg24

Probably not foolishly. Your solicitor would have pointed out the tie in period and penalties and you have benefited from a very low rate.

This point interests me. Having bought two houses, with a new mortgage each time, my solicitors (different firms) have never even mentioned my mortgage. Not a problem for me, as I had thoroughly researched the products beforehand, but for many people who do not understand what they are agreeing to, perhaps they do not receive this advice/ information? x

dunstonh

dmg24 wrote: »

This point interests me. Having bought two houses, with a new mortgage each time, my solicitors (different firms) have never even mentioned my mortgage. Not a problem for me, as I had thoroughly researched the products beforehand, but for many people who do not understand what they are agreeing to, perhaps they do not receive this advice/ information? x

Did you sign the contract in front of the solicitor or did you sign it and send it back direct?

The old fashioned way was for the contract to be signed in front of the solicitor who would point out any tie ins and penalties. Increasingly, people dont do this so dont get the warnings that the solicitors used to give. I guess it saves a few pounds and not a problem for those that know but for those that dont it can mean they are not as informed as they should be before signing a contract.

dmg24

Signed the mortgage papers at the sols both times. The second sol did not advise me on a thing during the whole conveyancing process, so I expected no better from her, but the first was otherwise very thorough.

Maybe things like this should be more uniform, sols should have a set criteria of advice that they have to cover in the conveyancing process, on top of the paper process that they complete?

Jonbvn

dmg24 wrote: »

This point interests me. Having bought two houses, with a new mortgage each time, my solicitors (different firms) have never even mentioned my mortgage. Not a problem for me, as I had thoroughly researched the products beforehand, but for many people who do not understand what they are agreeing to, perhaps they do not receive this advice/ information? x

Our experience is the same. The solicitor was only interested in the mortgage deed and when they could draw down the funds.