Mortgage - Early redemption fees, options?
Discussion
errr thanks for that mate. Guilty of not looking at the detail perhaps. But not sure why you think I don't understand the interest element.
Besides, considering I arranged the whole thing from a hospital bed with a view to putting a roof over my families head if I wasnt around perhaps I can be forgiven for missing the precise terms on early repayment. If you've nothing more to add perhaps leave it to other more helpful posters.
Besides, considering I arranged the whole thing from a hospital bed with a view to putting a roof over my families head if I wasnt around perhaps I can be forgiven for missing the precise terms on early repayment. If you've nothing more to add perhaps leave it to other more helpful posters.
Edited by DoubleSix on Tuesday 16th September 08:10
DoubleSix said:
errr thanks for that mate. Guilty of not looking at the detail perhaps. But not sure why you think I don't understand the interest element.
Besides considering I arranged the whole thing from a hospital bed with a view to putting a roof over my families head if I wasnt around perhaps I can be forgiven for missing a clause on early repayment. If you've nothing more to add perhaps leave it to other more helpful posters.
In your defence, we complete lots of mortgages per year for the last ten years or so, and not ONE has ever brought up an issue over Early Repayment Charges in reference to the actual %, a few have just wanted to clarify that the ERC's end when the fixed rate ends, but thats about it. People naturally don't assume that they will be redeeming the mortgage during the fixed rate period............in your situation, you mentioned that you don't fancy renting the property, but for £22k, I think I'd find a way!Besides considering I arranged the whole thing from a hospital bed with a view to putting a roof over my families head if I wasnt around perhaps I can be forgiven for missing a clause on early repayment. If you've nothing more to add perhaps leave it to other more helpful posters.
As an advisor, I can't "ram home" the potential ramifications of every possibility of life that can occur to people.
Good luck!
Cheers Sarnie,
As you say, my query was about the % ERCs and my surprise that they didn't ratchet down as appears commonplace within the mortgage space - I didn't come here under some illusion they could be avoided.
I take your point about not being able to advise people on any and every scenario but I guess where a product has an unusual or particularly restrictive feature I would expect to have that highlighted and underlined.
Thanks again for clarifying what I suspected anyway.
As you say, my query was about the % ERCs and my surprise that they didn't ratchet down as appears commonplace within the mortgage space - I didn't come here under some illusion they could be avoided.
I take your point about not being able to advise people on any and every scenario but I guess where a product has an unusual or particularly restrictive feature I would expect to have that highlighted and underlined.
Thanks again for clarifying what I suspected anyway.
I think it would be worth writing to your lender explaining your situation and to see if a compromise can be made. Asking why they don't have reducing ERC% consistent with the market and in line with their breakage costs. You'll have a better chance of success the later you go through your term so if you can wait to year three it would be better.
Bad luck 66 - I too work in finance and royally screwed up my mortgage!
Just on the "front loading interest" comment though - that isn't really what is happening.
That is just the way a repayment mortgage works... Santander aren't doing anything nefarious or non-standard.
It is simply the nature of the balance reducing over time that by definition you are going to have a larger chunk of interest at the beginning on a fixed monthly fee.
Also while I agree there might be a "cooling" of the market, deciding to sell your house (and not buy another) is a fairly extreme way to reduce your property exposure - particularly considering the absolutely MASSIVE transaction costs (even ex-ERCs)!!
If it is temporary cashflow or whatnot - payment holidays might be possible?
Or rent it - certainly worth the hassle for 5% of the value of the mortgage!
Or port to a non-bubble location outside London? (Again though - transaction costs hurt...)
Just on the "front loading interest" comment though - that isn't really what is happening.
That is just the way a repayment mortgage works... Santander aren't doing anything nefarious or non-standard.
It is simply the nature of the balance reducing over time that by definition you are going to have a larger chunk of interest at the beginning on a fixed monthly fee.
Also while I agree there might be a "cooling" of the market, deciding to sell your house (and not buy another) is a fairly extreme way to reduce your property exposure - particularly considering the absolutely MASSIVE transaction costs (even ex-ERCs)!!
If it is temporary cashflow or whatnot - payment holidays might be possible?
Or rent it - certainly worth the hassle for 5% of the value of the mortgage!
Or port to a non-bubble location outside London? (Again though - transaction costs hurt...)
p1doc said:
what is porting?
my mortgage also ratchets down erf's but bizarrely have decreased over last 2 years comparing mortgage statements??!! despite paperwork at start saying set times and payments
martin
Porting is just transferring your existing mortgage to another property in simple terms.my mortgage also ratchets down erf's but bizarrely have decreased over last 2 years comparing mortgage statements??!! despite paperwork at start saying set times and payments
martin
walm said:
Bad luck 66 - I too work in finance and royally screwed up my mortgage!
Just on the "front loading interest" comment though - that isn't really what is happening.
That is just the way a repayment mortgage works... Santander aren't doing anything nefarious or non-standard.
It is simply the nature of the balance reducing over time that by definition you are going to have a larger chunk of interest at the beginning on a fixed monthly fee.
Also while I agree there might be a "cooling" of the market, deciding to sell your house (and not buy another) is a fairly extreme way to reduce your property exposure - particularly considering the absolutely MASSIVE transaction costs (even ex-ERCs)!!
If it is temporary cashflow or whatnot - payment holidays might be possible?
Or rent it - certainly worth the hassle for 5% of the value of the mortgage!
Or port to a non-bubble location outside London? (Again though - transaction costs hurt...)
Cheers Walm,Just on the "front loading interest" comment though - that isn't really what is happening.
That is just the way a repayment mortgage works... Santander aren't doing anything nefarious or non-standard.
It is simply the nature of the balance reducing over time that by definition you are going to have a larger chunk of interest at the beginning on a fixed monthly fee.
Also while I agree there might be a "cooling" of the market, deciding to sell your house (and not buy another) is a fairly extreme way to reduce your property exposure - particularly considering the absolutely MASSIVE transaction costs (even ex-ERCs)!!
If it is temporary cashflow or whatnot - payment holidays might be possible?
Or rent it - certainly worth the hassle for 5% of the value of the mortgage!
Or port to a non-bubble location outside London? (Again though - transaction costs hurt...)
Appreciate my terminology of 'front-loading' may have been misused.
Looks like renting may be the way forward! Groan.
p1doc said:
what is porting?
my mortgage also ratchets down erf's but bizarrely have decreased over last 2 years comparing mortgage statements??!! despite paperwork at start saying set times and payments
martin
Without seeing the paperwork I'm going to assume that your ERC's are a % of the balance at the time of redemption, so as your balance reduces, even though the % stays the same figure, the charge is reducing over time as your balance reduces...my mortgage also ratchets down erf's but bizarrely have decreased over last 2 years comparing mortgage statements??!! despite paperwork at start saying set times and payments
martin
Sarnie said:
DoubleSix said:
Interesting, probably won't apply to me, but appreciate the input.
Does seem wrong though. Surely the front loaded interest is there to ensure they get their pound of flesh, the ERC just seems punitive. Relationships break down, people get ill, job offers abroad etc. Things change!
Of course but the lender will simply refer you to your mortgage offer......it will be there in black & white. Most people though will skim read most things and not consider the details fully, as in most cases, redeeming the mortgage early probably part of the initial plan......Does seem wrong though. Surely the front loaded interest is there to ensure they get their pound of flesh, the ERC just seems punitive. Relationships break down, people get ill, job offers abroad etc. Things change!
"With further reference to your proposed purchase of the above property, I am pleased to confirm that I have now received your Mortgage offer from the Bank of Zimunidia. This advises me that you will be borrowing the sum of £???,000.00, plus £995.00 fees on a capital interest repayment basis, over a term of 25 years. The interest rate applicable to this Mortgage will be fixed at 3.39% until the 2nd October 2019. As you have a fixed rate period of interest I would draw your specific attention to Section 10 of your Mortgage offer detailing the early repayment charge. You would need to pay this, or at the least a proportion of it, should you pay the whole or significant portion of your Mortgage prior to the 2nd October 2019. If you have any questions about this please discuss it further with your mortgage advisor."
Sarnie said:
Without seeing the paperwork I'm going to assume that your ERC's are a % of the balance at the time of redemption, so as your balance reduces, even though the % stays the same figure, the charge is reducing over time as your balance reduces...
that makes mores sense but nil in mortgage literature and bizarrely kept the same for several years but only decreased over last 2 years but quite substantially from £8,000 2 years ago to £5,000 this year??would it decrease quicker if overpayments made or coming to end of mortgage?
martin
Rude-boy said:
Not much to add other than, unless this was an 'in house' remortgage with your lender you should have had a letter from your solicitor with something to the effect of:-
"With further reference to your proposed purchase of the above property, I am pleased to confirm that I have now received your Mortgage offer from the Bank of Zimunidia. This advises me that you will be borrowing the sum of £???,000.00, plus £995.00 fees on a capital interest repayment basis, over a term of 25 years. The interest rate applicable to this Mortgage will be fixed at 3.39% until the 2nd October 2019. As you have a fixed rate period of interest I would draw your specific attention to Section 10 of your Mortgage offer detailing the early repayment charge. You would need to pay this, or at the least a proportion of it, should you pay the whole or significant portion of your Mortgage prior to the 2nd October 2019. If you have any questions about this please discuss it further with your mortgage advisor."
Yeah, I know what your saying and no doubt the paperwork has the detail covered. "With further reference to your proposed purchase of the above property, I am pleased to confirm that I have now received your Mortgage offer from the Bank of Zimunidia. This advises me that you will be borrowing the sum of £???,000.00, plus £995.00 fees on a capital interest repayment basis, over a term of 25 years. The interest rate applicable to this Mortgage will be fixed at 3.39% until the 2nd October 2019. As you have a fixed rate period of interest I would draw your specific attention to Section 10 of your Mortgage offer detailing the early repayment charge. You would need to pay this, or at the least a proportion of it, should you pay the whole or significant portion of your Mortgage prior to the 2nd October 2019. If you have any questions about this please discuss it further with your mortgage advisor."
But as someone who advises clients on areas they may not be familiar with I make it my business to highlight quirks or oddities; say restricted liquidity or upcoming corporate actions. It's just good practice even though I could glibly point to the small print and say "we sent you the stuff, didn't you read it?".
The sooner the mortgage market gets some proper regulation the better imo.
Anywayz, lesson learn't.
DoubleSix said:
Yeah, I know what your saying and no doubt the paperwork has the detail covered.
But as someone who advises clients on areas they may not be familiar with I make it my business to highlight quirks or oddities; say restricted liquidity or upcoming corporate actions. It's just good practice even though I could glibly point to the small print and say "we sent you the stuff, didn't you read it?".
The sooner the mortgage market gets some proper regulation the better imo.
Anywayz, lesson learn't.
Proper regulation? It's possibly the most heavily regulated industry in the UK!But as someone who advises clients on areas they may not be familiar with I make it my business to highlight quirks or oddities; say restricted liquidity or upcoming corporate actions. It's just good practice even though I could glibly point to the small print and say "we sent you the stuff, didn't you read it?".
The sooner the mortgage market gets some proper regulation the better imo.
Anywayz, lesson learn't.
I know you feel irked by this but it's not a "quirk or an oddity" it's extremely common practice and has only become an issue for you due to the change in your circumstances, circumstances which your advisor nor lender could foresee and be able to advise you on....
I see both sides to this: giving DoubleSix the benefit of the doubt here - if someone who is pretty good with numbers and finance isn't aware of a MASSIVE issue with his mortgage then what hope is there for the regular Joe who can't tell his LTV from his APR.
On the other hand since 09 the regulations have gone insane. Although most of it appears to be for the banks to satisfy THEMSELVES that they aren't taking on more risk than they thought. (e.g. affordability criteria worth more than self-assessment/lies.)
I can only assume more consumer protection is built in too so teaser rates are explained better and indeed whether or not you can really afford it is properly established.
BUT - DoubleSix you still seem to think someone has pulled the wool over your eyes.
In my experience SOME fixed rates have a declining ERCs SOME don't. There certainly isn't an industry standard on it other than the simple fact that almost every fixed rate will have some sort of ERC.
If anything a fixed ERC %age is EASIER to explain than one that declines.
On the other hand since 09 the regulations have gone insane. Although most of it appears to be for the banks to satisfy THEMSELVES that they aren't taking on more risk than they thought. (e.g. affordability criteria worth more than self-assessment/lies.)
I can only assume more consumer protection is built in too so teaser rates are explained better and indeed whether or not you can really afford it is properly established.
BUT - DoubleSix you still seem to think someone has pulled the wool over your eyes.
In my experience SOME fixed rates have a declining ERCs SOME don't. There certainly isn't an industry standard on it other than the simple fact that almost every fixed rate will have some sort of ERC.
If anything a fixed ERC %age is EASIER to explain than one that declines.
DoubleSix said:
Yeah, I know what your saying and no doubt the paperwork has the detail covered.
But as someone who advises clients on areas they may not be familiar with I make it my business to highlight quirks or oddities; say restricted liquidity or upcoming corporate actions. It's just good practice even though I could glibly point to the small print and say "we sent you the stuff, didn't you read it?".
The sooner the mortgage market gets some proper regulation the better imo.
Anywayz, lesson learn't.
On the subject of advice, did you arrange the mortgage through an adviser or DIY direct with the lender?But as someone who advises clients on areas they may not be familiar with I make it my business to highlight quirks or oddities; say restricted liquidity or upcoming corporate actions. It's just good practice even though I could glibly point to the small print and say "we sent you the stuff, didn't you read it?".
The sooner the mortgage market gets some proper regulation the better imo.
Anywayz, lesson learn't.
walm said:
BUT - DoubleSix you still seem to think someone has pulled the wool over your eyes.
In my experience SOME fixed rates have a declining ERCs SOME don't. There certainly isn't an industry standard on it other than the simple fact that almost every fixed rate will have some sort of ERC.
If anything a fixed ERC %age is EASIER to explain than one that declines.
Appreciate all you are saying, and the balanced manner in which you are saying it.In my experience SOME fixed rates have a declining ERCs SOME don't. There certainly isn't an industry standard on it other than the simple fact that almost every fixed rate will have some sort of ERC.
If anything a fixed ERC %age is EASIER to explain than one that declines.
To avoid any doubt, I'm not saying someone 'pulled the wool' or set out to deceive. I'm just saying they were a bit crap.
Reflecting on this a bit I think the nature of the relationship doesn't help. It's a one off, long term agreement. So there's no on-going contact or relationship between the advisor and the client. In that sense I think there may be a strong incentive get a signature a move on to the next one, not too much accountability on the face of it.
DoubleSix said:
I think there may be a strong incentive get a signature a move on to the next one, not too much accountability on the face of it.
Absolutely - particularly if unlike Sarnie you aren't really looking for repeat business.The accountability is almost ALL to the lender to lend sensibly (i.e. check the borrower can afford it) rather than much to do with consumer protection.
So I can well imagine a discussion such as "look there are ERCs, of course, everyone had them on a fix, but you aren't ever going to need to worry about them so let's concentrate on our industry leading headline rate...!".
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