Excessive ERC on my mortgage

mechanicalman_2

Good Evening,

After a bit of advice.  I have agreed to sell my house and due to lack of options I wish to move into rented.  However, I am tied into a fixed rate mortgage.  There is not long left on this mortgage (less than 4 months), however my ERC is 8.5K!  To put this into perspective my mortgage payments are around £750 per month.  

I have spoken to my mortgage provider, and they will not budge on the settlement figure.  Have I got a case for the Financial Ombudsman?  Or can anybody think of another way out of it?  Except asking my buyer to wait the 4 months?

Thanks in advance.

grumiofoundation

Presuming ERC was clearly displayed when you applied for mortgage what case would you have to go to financial ombudsman with? 

[Deleted User]

Up until this point everything done has been your choice.  The bank didnt force to you to agree to the mortgage, they didnt force you to sell now, and they didnt force you not to buy another property at port the mortgage.    So why should they waive the charge?

You wont get very far with a complaint. Thousands before you have tried and failed and i havent heard of a single one being successful

mechanicalman_2

Cricky, bit hostile.  I was only asking.  
On the FOS site it says the reason some people challenge is.......

• the early repayment charge (ERC) is unfair
• the ERC is excessive, or wasn’t based on a reasonable pre-estimate of the cost to the lender of the mortgage being repaid early.............

I felt this fell into the "ERC is excessive" camp.  Hence I was wondewring if I could challenge it, or if anybody knew of another way.  

MaryNB

My mortgage illustration says the max ERC if I leave early is £8,500. I'm not sure it will be that easy to argue if you signed up to an agreement that quoted the same figure. It's written very clearly on mine.

dunstonh

Have I got a case for the Financial Ombudsman?

No.  The FOS expect the fee to reflect the costs and understand that there is always a line in the sand.  If they gave 3 months grace over the date, there would be people with 4 months to go moaning 

Modern ERCs reflect the fact that lenders fund their mortgages via means that they have to pay the investors if the money is repaid early and its only fair that the person creating the cost covers it.  Not all the other borrowers.

I felt this fell into the "ERC is excessive" camp. 

We cant tell as you haven't given the amount outstanding.

MWT

mechanicalman_2 said:

I felt this fell into the "ERC is excessive" camp.  Hence I was wondewring if I could challenge it, or if anybody knew of another way.  

Does the ERC calculation involve more than just a percentage amount of the outstanding mortgage, and do you agree with the calculation based on the information you were given when you agreed to the mortgage in the first place?

tim_london

ERC is usually based on the total amount you owe and not based on your monthly payment arrangement.  I.e someone who owe 100k mortgage over 25 years would pay the same as someone with 100k mortgage over 5 years.

If you tell us your mortgage size and information about the ERC % then we can comment whether it is excessive or not.  But even if it is, as long as lender followed FCA rules and gave you documents to explain the charges you have little ground to stand on.


Also, what makes you think you can sell a house and get it to completion date in 4 months?  Is it a no chain cash buyer?  Otherwise sounds over optimistic.

Thrugelmir

When does the fixed term expire? 

mechanicalman_2

Hello, to be honest I have no argument with the calculation.  

When I took the mortgage out (170k), I was told the ERC was 8.5k.  I thought it was high, but as they told me I could port the mortgage I didn't see it as an issue, I never envisaged myself moving into rented.  I am not saying it was mis-sold, because it wasn't.  
I then put my house on the market to line up with my mortgage ending.  However, our buyers are keen to get moving, and are not happy with the timeline I am providing.  I therefore wanted to explore my options.  Looking at other products I felt my ERC was much higher than rival products.  I therefore wanted to know if I had a case or not (for example certain sectors have T&C's that limit charges that can be imposed upon consumers).  If they answer is no (which it sounds like) then that is fine.  

mechanicalman_2

Also, what makes you think you can sell a house and get it to completion date in 4 months?  Is it a no chain cash buyer?  Otherwise sounds over optimistic.

My chain is only 2 long, the bottom of the chain are in rented.  Surley it can't take 4 months?