Early Repayment charge not decreasing yearly.

cmonwigan

I am looking to re-mortgage from BM Solutions to Mortgage Works. I currently have a 5 years fixed rate which has two years to run.  I have requested a redemption statement and BM are charging a 3% early repayment charge until 30th September 2023, after which it drops to 1%.  I am struggling to understand how they have come up with these figures and dates, as my first payment was made in Jan 3rd 2020.  I believe that the ERC should drop to 2% on January 3rd 2023.  Can I challenge BM Solutions?     

kingstreet

What documents are you looking at which suggest the ERC should drop to 2% next month?

You need to look at the illustration, your mortgage offer or your annual mortgage statement. ERCs vary from lender to lender and product to product so don't assume because one works that way yours should.

ERCs are also unlikely to change based on payment dates. If you have a fix until 30/09/2025 the ERC would normally change on 30/09 of the intervening years, if at all.

housebuyer143

cmonwigan said:

I am looking to re-mortgage from BM Solutions to Mortgage Works. I currently have a 5 years fixed rate which has two years to run.  I have requested a redemption statement and BM are charging a 3% early repayment charge until 30th September 2023, after which it drops to 1%.  I am struggling to understand how they have come up with these figures and dates, as my first payment was made in Jan 3rd 2020.  I believe that the ERC should drop to 2% on January 3rd 2023.  Can I challenge BM Solutions?     

Do you have the original paperwork that states the ERC? If so, yes. 

dunstonh

This should be very easy to resolve.   Your offer letter lays out the terms of your mortgage.  This protects both sides.   What does your offer letter state about the ERC?

cmonwigan

Damnation, I shot myself in the foot. It states:

5% of the capital repaid until 30/09/2020
4% of the capital repaid until 30/09/2021
3% of the capital repaid until 30/09/2022
3% of the capital repaid until 30/09/2023
1% of the capital repaid until 30/09/2024

Could I ask the team for supplementary advice?  I panicked about rates before the Truss debacle and managed to secure a 10yr fixed at 3.79 which we are due to complete in Jan. My current deal is 2.54 and the outstanding balance is £110k interest only.  So with the ERC looking at £3k, plus an additional £100 a month mortgage interest; is the decision to switch advisable, or should we hold off until 2025? I know the future is not a crystal ball but would appreciate a steer.

housebuyer143

cmonwigan said:

Damnation, I shot myself in the foot. It states:

5% of the capital repaid until 30/09/2020
4% of the capital repaid until 30/09/2021
3% of the capital repaid until 30/09/2022
3% of the capital repaid until 30/09/2023
1% of the capital repaid until 30/09/2024

Could I ask the team for supplementary advice?  I panicked about rates before the Truss debacle and managed to secure a 10yr fixed at 3.79 which we are due to complete in Jan. My current deal is 2.54 and the outstanding balance is £110k interest only.  So with the ERC looking at £3k, plus an additional £100 a month mortgage interest; is the decision to switch advisable, or should we hold off until 2025? I know the future is not a crystal ball but would appreciate a steer.

Personally I would ride out the good rate and secure something else in future, but I'm a little bit of a risk taker and don't see the point of spending thousands just to have peace of mind. 

cmonwigan

I should add we intend to make regular capital repayment of £300 per month going forwards.  The rental on the property is £750.
We are looking to supplement our pension income from the rental upon our retirement in 12 years time. 

dunstonh

As you don't come out of your fix until 2025, I wouldn't be too worried.   That is past the anticipated peak.  Almost certainly, your rate will be higher in 2025 but it seems daft to pay 3% to get out plus another 2 years at a higher rate.

cmonwigan

I've decided to lock in for the 10 years, so as not to go through the cost/stress of re-mortgaging every few years.   
I will be adding the upfront cost to the mortgage. Running through the MSE calculator,  with my intention to make  regular capital payments, then it doesn't work out that badly over the 10 years. 

london21

Depends on your mortgage agreement and lender.

Santander ERC for example is different to TSB's.