Early redemption charge?

Tight_Fart

I have a 5% early redemption charge on a £100k interest only loan at 1.29% until 8/2026, we are in the lucky position to be able to clear it.

To me, in the current climate, it would make sense for the lender to wave that charge.

Has anyone heard of lenders doing this? (I'm with Santander)

sammyjammy

Why would it make sense for the lender to waive that charge?  Regardless it won't happen, its a contractual part of your mortgage.

TheJP

Effectively you paying the mortgage off early means the lender losses out on income, you contractually agreed to pay an early repayment charge when you borrowed the money. I doubt they will waive it. 

ACG

Your assuming lenders will look at your case on an individual basis. Thats not possible. 
There is a thing in our industry called "Treating customers fairly" - that is not a case of doing what the customer wants, it is a case of treating customers the same. If they waive your ERC, they have to waive everyone elses ERC. 

One of the downsides to regulation. 

dunstonh

To me, in the current climate, it would make sense for the lender to wave that charge.

Lenders source the funding for fixed rates via various instruments.  Those at the source charge the lender for any early repayments.  Hence why the borrower faces the charge.      

So, why do you think it makes sense for a lender to waive a charge that is designed to cover the costs of you repaying your mortgage early?

Tight_Fart

sammyjammy said:

Why would it make sense for the lender to waive that charge?  Regardless it won't happen, its a contractual part of your mortgage.

Because if I deposit the funds with them, they'll pay me 3% while I only pay them 1.29%.

DE_612183

Tight_Fart said:

sammyjammy said:

Why would it make sense for the lender to waive that charge?  Regardless it won't happen, its a contractual part of your mortgage.

Because if I deposit the funds with them, they'll pay me 3% while I only pay them 1.29%.

So why would you want to pay if off early?

dunstonh

Tight_Fart said:

sammyjammy said:

Why would it make sense for the lender to waive that charge?  Regardless it won't happen, its a contractual part of your mortgage.

Because if I deposit the funds with them, they'll pay me 3% while I only pay them 1.29%.

It doesn't matter as the amount allocated to your mortgage is funded from sources that cater for their net interest margin at the point that tranche of borrowing was arranged.
What they do with the money you have on deposit will be used with today's net interest margin applied to it.   

They get to be profitable with both the mortgage and the deposit.  Whereas, if they waive the ERC and allow early repayment, it just creates a loss.  

Edi81

Try it and let us know when they say no. 

As others have said it is never going to happen!

housebuyer143

Why don't you just not clear it and wait until the term is up? If it's because you have some romantic notion of having a mortgage free house at any cost then you need to knock yourself out of it. 

Linton

If you are being charged 1.29% on £100K until 2026 and have the money now to clear the debt why dont you simply put the £100K into savings accounts or very safe investments (eg gilts)  and get higher interest than you are paying?