Early repayment charge - would a lender ever waive it?

HomelessChump

Hello folks,

I have a HTB London property with a Halifax mortgage of £100,000 and a HTB equity loan of about the same. I would be around 70% LTV if I extended my mortgage to buy out the equity loan, which I can now afford to do. The Halifax mortgage is just over 3 years into a 5 year fix at 2.9%, with an ERC of 3% for the next year and then 2% for the last year. I hadn't given serious thought to switching deals and paying the ERC before now but 2.9% is well above the current going rate for deals in the similar LTV bracket. The L&C calculator (if I'm using it properly) suggests I would more or less break even on the cost of the mortgage but that is before legal costs and ignoring the hassle, so the ERC is still a real disincentive.

Would Halifax ever consider waiving the ERC in exchange for me committing to a new five year term and effectively doubling the size of my mortgage with them now (so they'd make a lot more from me in the long run)? I expect the answer is 'No, the policy is the policy' but thought I'd ask. Cheers!

(I don't intend to do this immediately in any event since even the best deal isn't as good as the 0% interest on the equity loan for the first five years, but if the property market starts to recover - and the cost of buying out HTB begins increasing - then I'll do something.)

Thrugelmir

Might waive towards the end of the fixed term. Otherwise no. ERC's are in place for commercial reasons. 

ACG

Some lenders do occasionally waive the ERC but normally where there is illness or death involved. If you pay back your mortgage early, lenders incur costs themselves so I cant see them waiving it to be honest in this scenario, it des not really make financial sense, you said it yourself rates are now very low so why would they lose you as a 2.9% customer in order to keep you as a 1.8%(?) customer? 

Also there is no signs that house prices have actually dropped. We will start to see over the next month how surveyors react. 

HomelessChump

ACG said:

Some lenders do occasionally waive the ERC but normally where there is illness or death involved. If you pay back your mortgage early, lenders incur costs themselves so I cant see them waiving it to be honest in this scenario, it des not really make financial sense, you said it yourself rates are now very low so why would they lose you as a 2.9% customer in order to keep you as a 1.8%(?) customer? 

They have me as a 2.9% customer with a £100,000 mortgage for two more years. At the end of that period, I will take the best offer for a remortgage plus about £100,000 in extra borrowing to buy out HTB. The financial calculation would be whether it's more profitable to have me for at least another five years with about a £200,000 mortgage at less than 2% - it seems to be that it must be but it wouldn't surprise me if working that out in individual cases isn't worth their while.

ACG

Thats it, they have tens of thousands of customers if not hundreds of thousands. They are not going to sit down and do those sums because its just not worth it. Its not personal, its just not practical. 

[Deleted User]

By borrowing more from Halifax you will increase you ltv with them and increase the risk to them of losing money on a reposession. 
They will not view you borrowing more as a positive, to them its a riskier transaction so it won't be enough to convince them to waive any erc

I used to work for Halifax.  The only time I saw erc being waived was Death, paying mortgage off after a critical Illness payout, or if someone was in dire financial circumstances and allowing them to downsize penalty free put the bank in a better ltv position 

kingstreet

HomelessChump said:

ACG said:

Some lenders do occasionally waive the ERC but normally where there is illness or death involved. If you pay back your mortgage early, lenders incur costs themselves so I cant see them waiving it to be honest in this scenario, it des not really make financial sense, you said it yourself rates are now very low so why would they lose you as a 2.9% customer in order to keep you as a 1.8%(?) customer? 

They have me as a 2.9% customer with a £100,000 mortgage for two more years. At the end of that period, I will take the best offer for a remortgage plus about £100,000 in extra borrowing to buy out HTB. The financial calculation would be whether it's more profitable to have me for at least another five years with about a £200,000 mortgage at less than 2% - it seems to be that it must be but it wouldn't surprise me if working that out in individual cases isn't worth their while.

The ERC doesn't go to Halifax. It goes to whoever provided the rate swap for your fixed rate. You pay back Halifax and Halifax has to reimburse the market counterparty for its loss for the remaining period.