Redemption Penalities

willdo

Hi

We recently decided to move house to accomodate our growing family, and having a mortgage with our original mortgage company which stated we could port the mortgage (albeit potentially under a new product) to ensure our redemption penalty of circa £13k would be waived, we have found the ideal property (typically!).

However, having had our mortgage bought out by another finance company who stated that they would honour the terms and conditions of our existing mortgage, we have now been informed by this organisation that they cannot port the mortgage as they do not offer mortgage products which has left us in a bit of a dilema.

So, I guess what I'm asking is if anybody else out there has ever been in a similar situation and what did you do? Do we have the right to ask them to waive the redemption fee, or to at least negotiate this on the basis that they have placed us at an unfair disadvantage by not honouring the terms and conditions of our original mortgage? Or are we best just to sit tight for another 2 years until the fee is reduced to a nominal sum and just buy ourselves out of it?

Any help at this point would be gladly received, if only to enable us to make a decision one way or the other!

Thanks

WD

_Andy_

Hi

Which lender is it?

Thanks

homer_j_3

First of all, it sounds like you have been with a lender that has sold a book of mortgages to another company - typically the companies that buy them have no further lending facilities.

What you have to realise is that portability is an feature but one that is not guaranteed. Even if you had still been with the old company, which had the facility to lend, you would have had to go through underwriting criteria and could have been refused.

As this is the case and portability is not a guaranteed benefit, you have no options but to pay the 13k.

chappers

Wouldn't have though it would do any harm to do as you stated and say that as they they have removed some of the facilities of your mortgage, you think it only fair that they waive the ERC. You have nothing to lose by asking.

homer_j_3

I know for a fact that they will not do it. All they have to do to satisfy the terms and conditions and state that they decline it.

It doesn't matter why they have declined it. It is not a guaranteed feature like an overpayment facility or drawdown facility. It is like a further advance - they can consider it but they are not breaking the T&C's by declining.

There is no recourse with the FOS as the FOS cannot get involved with commercial decisions as such.

MarkyMarkD

Homer is quite right.

Portability is a very dubious benefit on any mortgage.

I would always advise that nobody relies on portability and therefore never enters into a mortgage agreement where they are tied in for a period longer than they may possibly live in their house.

chappers

Fair enough

Dick_here

MarkyMarkD wrote: »

Portability is a very dubious benefit on any mortgage.

It was a damn good benefit for me last year ! :T

MarkyMarkD

Don't get me wrong, !!!!!! here. It's a great benefit, if it works. But it's a huge millstone if it doesn't.

Hardly anyone who takes a "portable" mortgage expects to have to pay ERCs. But a fairly large proportion of such people do end up paying ERCs for lots of reasons:

- most commonly, their relationship breaks up and neither party wants to port the mortgage;
- less commonly, they move house and the new house, or the new employment situation, or the fact only one partner is now earning, or whatever means that the lender won't lend the money.

Dick_here

MarkyMarkD wrote: »

Don't get me wrong, !!!!!! here. It's a great benefit, if it works. But it's a huge millstone if it doesn't.

I don't see how it's a millstone. You lose nothing by having it. Having a fixed rate which leads to ERCs is the problem if you want to move, not the fact that you've got a portable mortgage.

MarkyMarkD

The millstone is believing that portability is a panacea. It is not, because it doesn't work in a reasonably large proportion of cases.

As you say, correctly, it's the original ERC that's the millstone. But people buy mortgages with ERCs, in the naive belief that portability eliminates the risk of ever having to pay the ERC.

I would personally not have any problem buying such a mortgage - I am confident enough in my relationship and financial circumstances as to believe that I would never have a problem with portability. And I don't intend to move during the period of any new mortgage either.

But many people in what are at best flaky relationships, with uncertain future career paths, buy mortgages with ERCs just because they are a tiny bit cheaper than those without, and then complain about the consequences when it all goes wrong.