Early Repayment Charges

kimwp

I realised due to combing through my mortgage contract yesterday that while I shouldn't incur a mortgage exit/redemption fee because I'm within ten years of the end of my term, I might incur an Early Repayment Charge (ERC), because I will be in the fixed period when my mortgage gets paid off - after the next monthly payment, the amount outstanding will be less than the monthly payment. The part of the contract about ERCs says that the charge will be 1% of the amount used for paying off the mortgage. Does this mean I could make an overpayment all but 10p (which would keep me under the annual overpayment allowance), then pay off the 10p and pay 1% ERC on that? (albeit 1% of 10p is a fraction of a penny)

Thrugelmir

The mortgage exit fee is to cover the legal costs of removing the mortgage charge registered at the Land Registry . A standard charge levied on mortgages. Not sure what the less than ten years to run has to do with you not incurring the fee. 

kimwp

Thrugelmir said:

The mortgage exit fee is to cover the legal costs of removing the mortgage charge registered at the Land Registry . A standard charge levied on mortgages. Not sure what the less than ten years to run has to do with you not incurring the fee. 

It's just how they have constructed their Fees and Charges (see link below).

https://www.nationwide.co.uk/-/media/MainSite/documents/products/mortgages/m628-tariff-of-charges.pdf

(It's more explicitly stated in my mortgage agreement along the lines of "you will not have to pay this if within ten years of the term end"

getmore4less

Some lenders allow normal payment to end without ERC during a fix
Some lenders the ERC is on original borrowing  if terminated during a fix
Some lenders do something different

Where an ERC is unavoidable as it gets to Zero  when not selling the usual thing to do is just let the mortgage run on a min payment till the ERC period runs out.

caeler

I don't see why not.  If you pay the amount that's within the 10% allowance, then call them for a redemption figure I can't see how they would charge you 1% on anything more than you are paying at that point.  Good luck!

kimwp

Thanks @caeler!

caeler

Interestingly Nationwide refunded me my last ERC saying something along the lines of "due to my loyalty and unused allowance".  I didn't question it as I was very pleased to get it back! 

kimwp

caeler said:

Interestingly Nationwide refunded me my last ERC saying something along the lines of "due to my loyalty and unused allowance".  I didn't question it as I was very pleased to get it back! 

Nice! Fingers crossed then!

kimwp

The letter came through today, yippee!
I didn't get a teeny charge and they just wrote off the £3.5ish remaining. The person I spoke to said that the ERC wouldn't have been applied to the final payment of £600ish (which is what I was trying to avoid) even though it was within the fixed period, because it would have been taken as part of the usual monthly direct debit.

caeler

Great news!