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Early Repayment Charge (ERCs)

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  • haras_n0sirrahharas_n0sirrah Forumite
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    Debt to income is on balance not payments e.g. if someone has a 30k car loan (total debt on credit report inc balloon payment) and a 50k income then this is over 50% of your income (so they would only allow up to 25k of debt on a 50k income)
  • edited 4 July at 10:24PM
    haras_n0sirrahharas_n0sirrah Forumite
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    edited 4 July at 10:24PM
    I get why you refixed but if you were moving why do a 5 year rather than a 2 (so the erc would be lower if you couldn't move it) I assume this was straight to bank rather than via an advisor?
  • edited 4 July at 10:03PM
    ThrugelmirThrugelmir Forumite
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    edited 4 July at 10:03PM
    GixxerDan said:
    dunstonh said:
    Porting is always subject to the criteria of the bank at the time of application.   Going into a fixed rate at that point was a foolish thing to do.   However, a rate switch with a bank is not going to be a missale.

    My question is whether they have a responsibility to tell us at the time that the balloon payment etc is factored in calculating your debt and affordability rather than just your monthly payments.

    Criteria could change an hour after you spoke to them. There are no absolutely no guarantees. The local advisor you spoke to can only say what the situation is at the time. The actual decisions are made by the risk management team at Head Office, totally remote and unconnected. 
    "The human understanding when it has once adopted an opinion ... draws all things else to support and agree with it." - Francis Bacon (1561 – 1626)
  • dunstonhdunstonh Forumite
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    When we spoke to Mortgage Advisor in October, they didn't say our overall balance for the cars would count against us. She only asked what we paid a month and she gave us quote on their rates at the time to give us an idea.

    Did you go through a factfind and receive a recommendation report at that time or was it just a casual conversation?

    My question is whether they have a responsibility to tell us at the time that the balloon payment etc is factored in calculating your debt and affordability rather than just your monthly payments.

    Maybe they didn't know there was a balloon payment and just thought it was a monthly payment.

    Criteria changes all the time.   Especially following a financial crisis.   Maybe it wasn't an issue at the time but is now.

    We can really only guess here.  You can have to ask the bank to find out.

    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • haras_n0sirrahharas_n0sirrah Forumite
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    Did you go through the advice process with a full fact find or did you just mention to the person over the phone that you were going to move and they checked the calculator to see if the affordability fit? Did they recommend a 5 year fix or did you tell them that is what you wanted?
    If a client in your position came along if they wanted to stay with the same lender I would do an agreement in principle with the lender to check that they would lend what you need including credit check before tying you in again (and even then the lowest tie in possible I.e 2 years because things can change) or more likely I would recommend switching to a no tie in deal with another lender so that you had the pick of the market when you move especially as Halifax product transfers are not that competitive and most lenders do free valuation and free solicitors so remortgage costs are minimal. 
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  • GixxerDanGixxerDan Forumite
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    I get why you refixed but if you were moving why do a 5 year rather than a 2 (so the erc would be lower if you couldn't move it) I assume this was straight to bank rather than via an advisor?

    I guess hindsight is a wonderful thing and perhaps we were a little naive. We both earn a decent wage and we never had any kind of suggestion that lending may be an issue and we've been with Halifax for years. The reason for fixing for longer was that I believed (in a pre Covid world) that interest rates were going to rise from where they were and didn't want to get stung in 2yrs time.
    dunstonh said:
    When we spoke to Mortgage Advisor in October, they didn't say our overall balance for the cars would count against us. She only asked what we paid a month and she gave us quote on their rates at the time to give us an idea.

    Did you go through a factfind and receive a recommendation report at that time or was it just a casual conversation?

    My question is whether they have a responsibility to tell us at the time that the balloon payment etc is factored in calculating your debt and affordability rather than just your monthly payments.

    Maybe they didn't know there was a balloon payment and just thought it was a monthly payment.

    Criteria changes all the time.   Especially following a financial crisis.   Maybe it wasn't an issue at the time but is now.

    We can really only guess here.  You can have to ask the bank to find out.

    It was more just a casual conversation face to face at our local branch. We did have an AIP in place January but this expired as new build wasn't complete. AIP was just completed online and didn't ask for total price of the cars, just our monthly commitments which is why we are frustrated. From doing a quick Google search, it appears this is common practice by banks when assessing affordibility and not a more cautious approach to lending post covid which is why we believe we should have been warned before we tied in to a new deal
    If I'm honest, I've never heard of a recommendation report. What does that mean? How do you go about getting one? 
    haras_n0sirrah said:
    Did you go through the advice process with a full fact find or did you just mention to the person over the phone that you were going to move and they checked the calculator to see if the affordability fit? Did they recommend a 5 year fix or did you tell them that is what you wanted?
    If a client in your position came along if they wanted to stay with the same lender I would do an agreement in principle with the lender to check that they would lend what you need including credit check before tying you in again (and even then the lowest tie in possible I.e 2 years because things can change) or more likely I would recommend switching to a no tie in deal with another lender so that you had the pick of the market when you move especially as Halifax product transfers are not that competitive and most lenders do free valuation and free solicitors so remortgage costs are minimal. 
    A bit of both. We had a face to face meeting in October where we discussed our finances and she gave us a rough quote purely based on rates at the time so we could assess whether it was affordable. Part of this process was asking about our finances and knew we had 2 cars on pcp finance. Balloon payments etc weren't discussed, purely the monthly payment. 
    A recommendation wasn't made as such, she just said we could sit on variable rate for a few months until the house was ready then apply for new mortgage or we could fix in. Term length wasn't recommended, basically it was upto us.
    Again, banks taking into account overall debt, not just monthly payment can't be a new thing. Maybe before 2008 but certainly not after the crash. Does an advisor have a responsibility to make us aware that that is the case or is it purely down to the customer to do their research?
     I hold my hands up and admit we were naive but we just considered our monthly expenditure and our disposable income. Neither of us are particularly savvy when it comes to details of financial workings of banks which is why we relied on an advisor to give us the information. 
  • edited 5 July at 11:51AM
    haras_n0sirrahharas_n0sirrah Forumite
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    edited 5 July at 11:51AM
    You didn't speak to an advisor as such - you spoke to a person selling mortgages in a bank who can only offer mortgages from their own range. This is why independent advice is so important but we live and learn.
    With cars the monthly payment is used for affordability but when looking into the whole case the overall debt will be factored in as to whether they will lend to you. How much is the outstanding debt against incomes? There is usually a tipping point and with some lenders that is 50%
    I had a client recently with a 52k car loan (but monthly payment was within affordability) and an 80k salary - aip declined with halifax despite a credit score in the high 900's and no adverse. We have managed to get her sorted elsewhere but I suspect that the car balances are your problem if high compared to salaries. 
    Speak to a whole of market broker about your options but the halifax erc is a bitter pill to swallow.
  • ThrugelmirThrugelmir Forumite
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    "A recommendation wasn't made as such, she just said we could sit on variable rate for a few months until the house was ready then apply for new mortgage or we could fix in. Term length wasn't recommended, basically it was upto us."

    By opting for fixed rate not the SVR how much money have you saved? 
    "The human understanding when it has once adopted an opinion ... draws all things else to support and agree with it." - Francis Bacon (1561 – 1626)
  • dunstonhdunstonh Forumite
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    If I'm honest, I've never heard of a recommendation report. What does that mean? How do you go about getting one?

    It is what mortgage brokers/advisers give you when you seek mortgage advice.  It is a summary of the recommendation and reason why.      And when the term adviser is used here it means a real adviser.  Not a bank clerk who has "adviser" in their title but is not a real adviser.

    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • GixxerDanGixxerDan Forumite
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    You didn't speak to an advisor as such - you spoke to a person selling mortgages in a bank who can only offer mortgages from their own range. This is why independent advice is so important but we live and learn.
    With cars the monthly payment is used for affordability but when looking into the whole case the overall debt will be factored in as to whether they will lend to you. How much is the outstanding debt against incomes? There is usually a tipping point and with some lenders that is 50%
    I had a client recently with a 52k car loan (but monthly payment was within affordability) and an 80k salary - aip declined with halifax despite a credit score in the high 900's and no adverse. We have managed to get her sorted elsewhere but I suspect that the car balances are your problem if high compared to salaries. 
    Speak to a whole of market broker about your options but the halifax erc is a bitter pill to swallow.
    That is very similar situation to what we are in. Good credit scores and monthly payments are affordable but the overall debt is higher than 50% of combined salaries although not sure how that's a fair assessment when you're contracted for 3/4 years with car company and no requirement or loophole requiring the full payment in 12 months but nothing you can do if that's how they work, just seems unfair.
    You're right about the banks own advisor but surely they still have a requirement to give you all the information and warn you of potential pitfalls? 
    "A recommendation wasn't made as such, she just said we could sit on variable rate for a few months until the house was ready then apply for new mortgage or we could fix in. Term length wasn't recommended, basically it was upto us."

    By opting for fixed rate not the SVR how much money have you saved? 
    Not sure in real monetary terms but at least 2% difference between our fixed rate and SVR at the time. 



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