Facing an unexpected early repayment charge!

silentmemory_2

This time last year I took out my first mortgage (Halifax). Yesterday I received my annual statement, to discover I'm being charged a big redemption fee for overpayment

Now this goes directly against the advice given to me by my mortgage advisor, who as I understood it said I could overpay by 10% each year and would only be charged an early redemption fee if I completely paid off the balance of the mortgage.

I made the overpayments in two lump sums and have a letter from the lender for each time, saying I would not be charged a fee for overpayment.

LETTER#1: "Further to your recent telephone call you can pay a maximum of ten percent of the amount allocated to the product penalty free within a twelve month period. The twelve month period being based on the mortgage start date."

So I paid lump sum #1. Then when I was ready to pay lump sum #2, I called them up to get it in writing, precisely so I didn't incur any overpayment charges.

LETTER#2: "I confirm that you may make part repayment to your mortgage totalling £(10%) and no early repayment fee would be charged. As you have made a part repayment of £(6%), this allowance has been reduced to £(4%).

Each of these letters was signed by different people in their customer services department, so they can't blame one idiot for being bad at his job.

The actual figures are as follows:
Mortgage: £130,000 @ 5.29%
Overpayment: £13,000
Redemption fee: £2,600
Amount outstanding: £114,500 (or £117,000 if you include the redemption fee)
Base rate: 6.75%

The following line in the TOC would also appear relevant: "If you do not keep to any of the mortgage conditions during any special rate period, we can charge interest at base rate on all the money you owe us".

What I'd like to know is twofold:

1) Do I have a legitimate complaint against the Halifax which might result in the waiving of both the redemption fee and the additional redemption fee administration charge of £150!

2) Am I financially better off for having overpaid £13,000 and paying the redemption fee, or would I have been better off not having overpaid anything at all?

Many thanks to any and all who can help/advise.

payless

Are you sure the redemption fee has been levied OR is it just telling you what the current redemption fee is, if you were to leave product

as £2600 would be 20% of the overpayment !
but 2% of the total loan ( sounds more like it)

Woby_Tide

can only assume it's human error on their behalf probably leading to a miscalculation, i.e. 10% at the time you took out the mortgage is going to be more than 10% when you make the overpayments, i.e. after 6 months your mortgage outstanding was £128k, so now 10% is only £12.8k of which 4% is no longer £5.2k but slightly less.

What have Halifax said when you have spoken to them about it?

silentmemory_2

payless wrote:

Are you sure the redemption fee has been levied OR is it just telling you what the current redemption fee is, if you were to leave product

as £2600 would be 20% of the overpayment !
but 2% of the total loan ( sounds more like it)

It certainly looks as though it's been levied, this from my annual statement:

Amount owing as at 31.08.2005: £114,250
Repayment administration fee: £150
Early redemption charge: £2,600
Total amount to repay: £117,000

silentmemory_2

Woby_Tide wrote:

can only assume it's human error on their behalf probably leading to a miscalculation, i.e. 10% at the time you took out the mortgage is going to be more than 10% when you make the overpayments

This was exactly why I had them confirm what was left to overpay, see LETTER#2. Apparently it's 10% of the total for that year, not 10% of whatever remains to be paid off at the time of making the overpayment. Basically, they gave me an actual figure, I paid exactly that.

What have Halifax said when you have spoken to them about it?

I've yet to discuss it with them, I would first like to know where I stand before being fobbed off. I can't imagine them wanting to waive nearly £3k in fees + whatever I've saved on £13k's worth of interest.

payless

I still can't see it, why would they be levying /quoting the full amount (ERP) for a part redemption and a repayment admin charge as you have not closed account

I think you are either reading a (total) redemption statement or the info is being shown on the annual statement for guidance, rather than in the actual "account statement" where interest & charges are levied together to repayments made.

call them and check (or if you want - email / fax me a copy - blank any other details - and I will look at it and explian what they have done)

MortgageGenie

I agree with payless, I think you're misunderstanding the letter.

I believe it's saving:

You currently owe: £114250
But if you clear the mortgage today there will be:
Admin fee: £150
Early redemption charge: £2,600
Thus the total payable if you clear the mortgage today is £117,000

A quick call to the Halifax should put your mind a rest.

silentmemory_2

Thank you all, payless and MortgageGenie, your posts did make sense, I do have a balance owing and then a 'redemption details' section which give a total balance including the charges.

I phoned Halifax, they confirmed the redemption charges would only apply if I were to cancel the policy today, and that the balance owing is what I currently actually, er, owe.

That's a big relief, thanks again :beer: