Remortgage - Best Date to Change Lender

CSL0183

RelievedSheff said:

If your equation is right then the ERC today would be in the region of £1300.

I would say that would probably be about right if the £3,704 is right at day 365 remaining. (If you haven’t reduced the balance further on the illustration by making additional payments)

You are about 2/3 of the way through Year 2 with a 1/3 or so remaining so 1/3 of £3,704 would be in the right ball park yes. Remortgaging at the minute may take a couple of months to complete so you could eat into that £1300 by halving it again if it completes in a couple of months time. The ERC is taken from the date of completion. If you’re remortgaging to another lender, you may need new valuations etc carried out so all that takes time. 

It may work out, it may not but gives you the option. 

K_S

RelievedSheff said:

If your equation is right then the ERC today would be in the region of £1300.

@RelievedSheff As far as I can tell, the ERC payable as per your mortgage offer is a flat rate until the last day of the fix, it is not pro-rated. I've seen 5 year fix offers (from other lenders) where it is pro-rated (eg: 1% per year left on the product, adjusted for part-years) and it's usually stated clearly.

Please do feedback if you contact Kensington to clarify this point.

RelievedSheff

K_S said:

RelievedSheff said:

If your equation is right then the ERC today would be in the region of £1300.

@RelievedSheff As far as I can tell, the ERC payable as per your mortgage offer is a flat rate until the last day of the fix, it is not pro-rated. I've seen 5 year fix offers (from other lenders) where it is pro-rated (eg: 1% per year left on the product, adjusted for part-years) and it's usually stated clearly.

Please do feedback if you contact Kensington to clarify this point.

I thought that was the case from what was written in illustration.

We are quite happy to stay with this mortgage until after the 1st May. It isn't all that long now anyway and we are keen to avoid early repayment charges if we can. We will be tight to the 85% LTV bracket already so keen to avoid any extra expenditure if at all possible. 

CSL0183

K_S said:

RelievedSheff said:

If your equation is right then the ERC today would be in the region of £1300.

@RelievedSheff As far as I can tell, the ERC payable as per your mortgage offer is a flat rate until the last day of the fix, it is not pro-rated. I've seen 5 year fix offers (from other lenders) where it is pro-rated (eg: 1% per year left on the product, adjusted for part-years) and it's usually stated clearly.

Please do feedback if you contact Kensington to clarify this point.

It’s a good point but I have just remortgaged in a similar manner with HSBC. Mines was on a 5yr fix on a sliding scale of 5/4/3/2/1 ERC. 

I remortgaged with about 7 months left and my ERC penalty was pro rata’d so that my ERC worked out at around 0.6% as opposed to 1% that it said in the illustration. My documentation was like that above, It made no reference in my mortgage docs that ERC was worked out pro rata until I actually went through the process. Was a welcome surprise for me as I was expecting the full 1% penalty charge. 

K_S

@CSL0183 HSBC has probably updated the text from the time they issued your offer. Here's the text from the offer for an HSBC 5yr fix that I got for a client recently

CSL0183

K_S said:

@CSL0183 HSBC has probably updated the text from the time they issued your offer. Here's the text from the offer for an HSBC 5yr fix that I got for a client recently

Yes, you’re right. Wasn’t on my paperwork from 5yrs ago but is on my new 5yr fix issued a few months ago. I hadn’t noticed nor paid attention. 

I guess lenders all have different criteria, I hadn’t appreciated some would be flat % regardless if it’s day 365 to go or day 1 remaining. 

Thanks 

Thrugelmir

CSL0183 said:

RelievedSheff said:

The relevant info from our existing mortgage conditions regarding early repayment charges is attached below:


If I read that correctly it won't be "peanuts" to get out of this mortgage a few months early?

However, as you have paid 8 months and only have 4 months left in year 2. You would be 4/12 of 2% in an ERC which would equate to 0.7% of the balance (today). Factor in a couple months for the remortgage and you would likely be in the 0.3% region (if you remortgaged two months early) 

There's no pro-rata on ERC's.  The full % remains in place for the entire year. Sometimes a lender allows an early switch to a new product penalty free. 

CSL0183

Thrugelmir said:

CSL0183 said:

RelievedSheff said:

The relevant info from our existing mortgage conditions regarding early repayment charges is attached below:


If I read that correctly it won't be "peanuts" to get out of this mortgage a few months early?

However, as you have paid 8 months and only have 4 months left in year 2. You would be 4/12 of 2% in an ERC which would equate to 0.7% of the balance (today). Factor in a couple months for the remortgage and you would likely be in the 0.3% region (if you remortgaged two months early) 

There's no pro-rata on ERC's.  The full % remains in place for the entire year. Sometimes a lender allows an early switch to a new product penalty free. 

That’s not true, just been through a remortgage process with HSBC to another mortgage with HSBC and was charged an ERC and was given a daily reduction figure. Infact, in my HSBC login, the ERC charge reduces every day. 

enthusiasticsaver

RelievedSheff said:

The relevant info from our existing mortgage conditions regarding early repayment charges is attached below:


If I read that correctly it won't be "peanuts" to get out of this mortgage a few months early?

I read that as a flat 2% ERC if you are in the second year.  You can double check with Kensington as all lenders are different but it does not  look like they charge pro rata so whether you repay the mortgage in month 1 or month 11 of the 2nd year it is 2%.  If there is any further small print on that early repayment clause read that and get it clarified as £3704 is indeed not peanuts. 

When we ever remortgaged we allowed up to 3 months so if your mortgage can be redeemed without penalty on 1st May then starting the process in February sounds logical.  However Covid seems to have  disrupted mortgage applications also no doubt helped by the increase in applications due to the stamp duty holiday and of course some lenders will be faster than others.  Stipulate on the application you do not want to complete until after the 1st May. 5.17% is a horrible rate so getting out of that will give you a big monthly cash bonus. 

RelievedSheff

enthusiasticsaver said:

RelievedSheff said:

The relevant info from our existing mortgage conditions regarding early repayment charges is attached below:


If I read that correctly it won't be "peanuts" to get out of this mortgage a few months early?

I read that as a flat 2% ERC if you are in the second year.  You can double check with Kensington as all lenders are different but it does not  look like they charge pro rata so whether you repay the mortgage in month 1 or month 11 of the 2nd year it is 2%.  If there is any further small print on that early repayment clause read that and get it clarified as £3704 is indeed not peanuts. 

When we ever remortgaged we allowed up to 3 months so if your mortgage can be redeemed without penalty on 1st May then starting the process in February sounds logical.  However Covid seems to have  disrupted mortgage applications also no doubt helped by the increase in applications due to the stamp duty holiday and of course some lenders will be faster than others.  Stipulate on the application you do not want to complete until after the 1st May. 5.17% is a horrible rate so getting out of that will give you a big monthly cash bonus. 

We will be reducing the term of the mortgage from the 23 years remaining to 15 years so there will be no monthly cash boost. Our monthly payments will be broadly the same.