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Paying off a lump sum between fixed rates (product transfer) avoiding ERC

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My current 5 year fix ends 31st December this year. Intention is to lock in a new fixed rate sometime in the final 6 months (as per what my lender, NatWest allows). I may, or may not want to pay off a lump sum overpayment (beyond my current 10% annual overpayment allowance) at the same time. I obviously want to avoid paying any ERC penalty. Is this going to be possible, or is the only solution to wait until my current fix ends, go onto variable rate, make the overpayment, and then apply for a product transfer (new fixed rate)? Or does NatWest give a window of opportunity at the start of the new fixed rate to make a penalty free overpayment? The lump sum could be a significant amount maybe up to 50% of my mortgage balance.

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  • dimbo61
    dimbo61 Posts: 13,727 Forumite
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    edited 2 March 2023 at 1:26PM
    Well you can pay 10% now and another 10% after the new deal starts.
    If your paying 50% off the need to get the very best fixed rate might not be that important 
    So maybe look at an Offset mortgage 
  • kingstreet
    kingstreet Posts: 39,248 Forumite
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    Ask the lender.

    As an example, Skipton allows unlimited ERC-free overpayments in the final month of a deal even if a product transfer is arranged to start the day after the current deal ends.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • ElwoodBlues
    ElwoodBlues Posts: 386 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    dimbo61 said:
    Well you can pay 10% now and another 10% after the new deal starts.
    If your paying 50% off the need to get the very best fixed rate might not be that important 
    So maybe look at an Offset mortgage 
    Yes, I'm aware of the 10% overpayment allowance. Although my overpayment allowance currently runs to the anniversary month of my initial loan commencement (October). So I have 10% overpayment allowance available up to 31st Oct 2023. Then another 10% for the 12 next months, or does the allowance/12 month period reset again when the product transfer would occur (on 1st Jan 2024)? If so, that would effectively give me nearly 30% overpayment allowance, which seems to good to be true.
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