Early Repayment charges (ERC)

wimeball

Hi All
First time post.

I currently have a great mortgage deal with Lloyds Bank, 10 yr fixed @1.74%.
Next year I am looking at moving in with Partner and will be paying back mortgage. 
I understand how ERC normally work, but in my contract it states:
 6.00% of the amount repaid on or before etc etc.

The key point is amount repaid, and NOT the amount to be repaid.

So is I had paid £20k back the it would only be 6% of the 20K.

Apprecaite any help on this

Thanks
G

Edi81

You would be charged 6% of how much you repay at the time of
settlement ie the cash you send them. If you sent £200k as an overpayment the ERC would be £12k 

georgehere

You may find that you are permitted to repay at least some amount without triggering the ERC ... I have often heard that lenders allow 10% repayment per year of the amount owing penalty free.
Depending on timing it could be material. IF for example you could pay back 10% now and then 10% when the next year starts that could reduce the total sum by 20% ... then when you repay the balance the ERC is calculated on a significantly lower number.

MWT

wimeball said:

The key point is amount repaid, and NOT the amount to be repaid.

There is no ERC until you trigger it by repaying, at that point they calculate it based on what you have repaid to clear the mortgage, there is no possible interpretation that would agree with your perspective.

JMA74

MWT said:

wimeball said:

The key point is amount repaid, and NOT the amount to be repaid.

There is no ERC until you trigger it by repaying, at that point they calculate it based on what you have repaid to clear the mortgage, there is no possible interpretation that would agree with your perspective.

I think the mental gymnastics would take you to an interpretation of:

6% of the amount paid into the mortgage before the final payment is made....

Doesn't make sense to me but that's the only way I can guess 

amnblog

I don't know the financial arrangements between you and your Partner, but watch paying offer a mortgage priced at 1.74% in preference to another than might be charging interest at 2 or 3 times that rate.

dimbo61

Do you need to sell the property ?
Could you get consent to  let and maybe Rent out the place for 12/24 months 
Does the ERC reduce once you have had the mortgage for 3/5 years ?

Nailer99

Don't do it! A 1.7% mortgage may not be seen again in our lifetimes, and the ERC will cost you a fortune. Can you not port the mortgage to the new property? If not, rent it out.

Nailer99

And to answer your question, the 6% would be on the outstanding balance. E.g. on a 100,000 mortgage it would be 6,000.

kingstreet

Nailer99 said:

And to answer your question, the 6% would be on the outstanding balance. E.g. on a 100,000 mortgage it would be 60,000.

Is it really?

dimbo61

The ERC would be based on the outstanding balance when you come to redeem the  mortgage.
Now if you have the spare money to do that can you overpay by the 10% allowed on your current mortgage deal before redeemingthe mortgage ?