Early repayment fee

inigma

Hello,

My current 2 year fix ends in August this year and with it the mortgage as a whole, but I might be in a position to end the mortgage in May.
I have a balance at the moment of £16,500, I have made no overpayments this mortgage year but I have the ability to make up to £14k in OP a year.
In May i should be in a position to clear the remaining mortgage using my overpayment allocation (not exceeding the 10% £14k figure)
I understand with Nationwide you have to pay an early repayment charge of 0.75% if you settle during the term of you mortgage, where do they take this charge against?  Is it the balance on the day you close the mortgage down, or is it the original balance that you drew against when you first purchased, or is it the balance at the start of your current mortgage deal?

MorningcoffeeIV

The amount you repay early - IE the outstanding balance if you're clearing it in full.

inigma

So if I overpay all of it apart from £10 then the next day I pay the £10 the early repayment would be on the £10?

maxmycardagain

My mates wife passed away one january, 6 months later, after a few tussles with the insurance company he was able to pay off the mortgage expecting the 6 payments he had made to be returned...

oddly his early repayment fee matched the 6 months total paid...

MorningcoffeeIV

inigma said:

So if I overpay all of it apart from £10 then the next day I pay the £10 the early repayment would be on the £10?

Only if you can make unlimited overpayments, which is unlikely if you have an ERC.

dunstonh

Most lenders have a cap on the amount you can overpay in a year without triggering the ERC.  Its unlikely that you can take the balance down to £10 to avoid the ERC unless you have been maximising the overpayment limit for very many years.

JMA74

Nationwide have their 10% overpayment allowance set as 10% of the original amount borrowed, so in later years it can be very very generous.

In this case, OP is likely to be correct that they can reduce balance down to a nominal amount and then pay that off.   Best check with Nationwide mortgage servicing though

Your other alternative is to do a rate switch on to a no erc tracker as you can do this 4 months in advance i think and choose to start it early 

inigma

Yeah so come may my outstanding balance would be less than my overpayment facility for the year.  So in may if I paid the balance off it would be an overpayment but within the agreed limit.  I was trying to work out or if anyone knew if I'd have to pay an early repayment charge if I cleared it in may using less than my overpayment facility for the year

housebuyer143

inigma said:

Yeah so come may my outstanding balance would be less than my overpayment facility for the year.  So in may if I paid the balance off it would be an overpayment but within the agreed limit.  I was trying to work out or if anyone knew if I'd have to pay an early repayment charge if I cleared it in may using less than my overpayment facility for the year

I believe if you redeem the mortgage within the fixed period the ERC is due.

inigma

Just spoke to nationwide, they said I would be charged 0.75% as erc on the outstanding balance.
I then asked about my overpayment facility, he then said "oh let me check" he then said the erc would be £20 (ERC was calculated as current balance less the 10% overpayment facility).  He confirmed if my outstanding balance was less than the overpayment facility there would be no erc.

JMA74

Thanks for coming back and updating.  Good to know for future