Leaving Mortgage Early and Selling

ELSTA

I'm a first time buyer and wondered if someone could explain a bit about leaving a mortgage early. I've looked through my mortgage offer but can't see anything about this - it only refers to early repayments. What would happen if I signed up to a 3-year fixed rate mortgage but after ONE year I decided I wanted to sell the property and, for example, move abroad or just return to renting a place? Thanks!

Edi81

You would need to pay the Early Redemption Charge if you were on a fixed rate mortgage.

davidmcn

ELSTA said:

I'm a first time buyer and wondered if someone could explain a bit about leaving a mortgage early. I've looked through my mortgage offer but can't see anything about this - it only refers to early repayments.

A sale means a repayment - you repay the mortgage on completion of your sale. It makes no difference to the lender whether you are repaying it because you are selling, remortgaging, or have just found a pile of cash.

ELSTA

Thanks for your replies. I'm afraid I still don't quite understand! davidmcn - when you say "you repay the mortgage on completion of sale" - what do you mean by that? If I sell up after 1 year of a 3-year fixed term rate (and I'm not porting), what would I have to pay to the lender? Presumably not the remaining 2 years of mortgages payments...?

John_

If there is a penalty for early redemption it will be detailed in your documentation. It will normally be something like 2% of the outstanding if you have two years fixed period remaining, and 1% if you have one.

so, for example, if your mortgage is £300,000 and you sell at the end of year one there would be a penalty of £6,000 in that case, which you would have to pay when you complete your sale.

davidmcn

ELSTA said:

Thanks for your replies. I'm afraid I still don't quite understand! davidmcn - when you say "you repay the mortgage on completion of sale" - what do you mean by that? If I sell up after 1 year of a 3-year fixed term rate (and I'm not porting), what would I have to pay to the lender? Presumably not the remaining 2 years of mortgages payments...?

You repay whatever the balance is of your mortgage account at that date, plus whatever the early redemption penalty is.

D.L

ELSTA said:

Thanks for your replies. I'm afraid I still don't quite understand! davidmcn - when you say "you repay the mortgage on completion of sale" - what do you mean by that? If I sell up after 1 year of a 3-year fixed term rate (and I'm not porting), what would I have to pay to the lender? Presumably not the remaining 2 years of mortgages payments...?

You know... all that money you borrrowed...?

If repaying early (i.e. within the time of your fixed period), you have to also pay an additional early repayment charge that is outlined in your contract. This can vary a lot depending on what you signed up to. Generally, the earlier in your fixed time, the higher the repayment charge. Some mortgage deals come with no early repayment charges but also come with higher interest rates.

Unicorn_cottage

If you have a tracker/variable rate you do not have any early redemption fees. Have you had a play around with https://www.moneysavingexpert.com/mortgages/best-buys/ ? You can select yes or no to "Only show mortgages with no early repayment charges"

ELSTA

Thank you all. Please excuse my lack of understanding - it's all very new and alien to me! So let's say I've purchased a house for £300k with a 3 year fixed rate. After one year I sell the house for the same price. Up to this point I have paid off £15k of my mortgage - so the balance is £285k. My early repayment rate is 1.5% of the outstanding loan balance. Some of you have said that I have to repay the balance of my mortgage. So the lender will receive £285k from the sale PLUS 1.5% of £285k? And that's it? And I can effectively keep the remaining £15k from the sale of the property? Thanks again for your patience.

RelievedSheff

ELSTA said:

Thank you all. Please excuse my lack of understanding - it's all very new and alien to me! So let's say I've purchased a house for £300k with a 3 year fixed rate. After one year I sell the house for the same price. Up to this point I have paid off £15k of my mortgage - so the balance is £285k. My early repayment rate is 1.5% of the outstanding loan balance. Some of you have said that I have to repay the balance of my mortgage. So the lender will receive £285k from the sale PLUS 1.5% of £285k? And that's it? And I can effectively keep the remaining £15k from the sale of the property? Thanks again for your patience.

You won't come out with £15k. The early repayment charge and solicitors fees, estate agents fees etc will all come out of the £15k.

You really need to do more research into what you have actually signed up for and should have done this prior to signing any paperwork when you bought your house!!