Santander ERC and Moving

Pezza4u

Hi, newbie here  I've been reading a lot on this forum over the past couple of weeks, it's been very interesting but now I need some advice of my own.

We bought our house in September 2017 with a 5 year fixed mortgage. It had always been our plan to move to a new area when it finished and try to reduce/clear the mortgage, plus have a larger house. Our LTV is around 23%.

When the fixed rate finished I decided to move to a tracker and switched to interest only. With energy, food and fuel prices being so high the money saved on repayments helped towards that. I wasn't overly concerned about it being interest only because like I said we had planned to move.

However, the base rate kept increasing and before I knew it our interest rate was heading for 6.50%. In a panic I changed from our 1.19% tracker to a 0.34% one, so also added £2,000 in fees to the mortgage within 12 months.

We have now decided to put our move off for 2-3 years, possibly a little longer. I had a promotion at work and we are due a good payrise from April. Plus finding work in our chosen area to move to is proving more difficult than I thought. So I'm keen to get back on to a repayment mortgage asap and fix the rate.

Santander are offering 3.89% with another £999 fee for 5 years. The 2 year is 4.39% plus the fee. If I take the 5 year and extend the term it will make the repayments the same amount as the current one on the interest only tracker, which I'm happy with. I would then try and make overpayments.

Does anyone know how Santander deal with ERCs if we moved in say 2-3 years time? I was sure they don't reduce it annually like some lenders or waive it if you are in the last 3-6 months of the fix should we move later. But now I'm not so sure.

When we move, we'll either need our whole mortgage or reduce it. Should Santander charge the full ERC (5%) could we port the whole amount and take out the difference as equity should the property be less than our current house? Then I could save that and make the maximum overpayment annually to reduce it, avoiding the ERC. Unless we needed the equity to spend on the new house.

What is the best way of moving back to a repayment plan. I can start it on the app and increase the term but not apply for a new rate at the same time. I obviously don't want to fix a new rate on an interest only mortgage so will do that first. I'm assuming when their advisor calls I can ask to fix for 5 years at the same time.

Also, on the app when I start the application to change to a repayment mortgage and extend the term it gives me the same monthly amount as what I'm paying currently, which is wrong. Is their system buggy?

amnblog

Porting is when an existing Santander mortgage customer moves home and transfers their mortgage product for the remainder of its term. Most of their products are portable. 

It is possible to ‘port’ most existing products to a new mortgage providing it is for house purchase/home ownership but not to a property being remortgaged or owned mortgage-free.

A customer’s entitlement to port their mortgage product is always subject to the conditions for transferring the loan to a new mortgage in their Mortgage Terms and Conditions. In particular, any new mortgage application made will be subject to a full credit assessment and the customer/property must meet our lending criteria at the time of the new application.

If we do not agree a new mortgage, the customer will not be able to port their mortgage product and they may then be required to pay an early repayment charge if they subsequently redeem their existing mortgage.

Where redemption of the existing mortgage and purchase of the new property is not simultaneous, providing the purchase of the new property completes within three months of the redemption date, the existing product can be ported to the new mortgage.

• If borrowing the same or more, on redemption of the existing mortgage, the early repayment charge (ERC) is paid in full and will be refunded after completion of the new purchase.
• If borrowing less, the ERC refund will be a proportionate amount, i.e. we’ll only refund an ERC on the amount your client has ported.

Any additional borrowing must come from the new business mortgage product range.

Pezza4u

Thanks, I remember reading that at some point.

I can't see us moving within 2 years so a 2 year fix doesn't seem worth it. Especially at 4.69% or 4.39% with a £999 fee, but the former is the better offer out of those two.

5 years at 3.89% with a £999 fee seems pretty good at the moment and it doesn't sound like the base rate will drop that much. It could take a while for our tracker to get that low.

If we still need the full mortgage when we move and have no problems porting it, then happy days. If we have to pay an ERC on a proportion of the mortgage I guess we'll just have to suck it up. 

Pezza4u

I've just been looking at my mortgage offers in the Santander app and the 5 year fix is 4.03% so I think I need to get this sorted asap.

Looking at the wording about the ERC it says the following:

This is a percentage charge if you want to repay this mortgage deal early, or if you transfer to a new deal while the charge still applies. It's also the percentage charge on overpayments more than your annual overpayment allowance. The early repayment charge steps down over the term of the deal. Full details are in the mortgage offer document, which is sent to you as part of any transfer.

The bit in bold implies the charge will now reduce over the term. Although I don't know by how much (assume 1% drop each year) that's good news, as when we do hopefully move in 2-3 years time any charge will be significantly less.