Mortgage - Early redemption fees, options?

Mortgage - Early redemption fees, options?

Author
Discussion

DoubleSix

Original Poster:

11,691 posts

175 months

Monday 15th September 2014
quotequote all
As some of you may be aware I work in finance so am not completely naïve to these issues but feel I may have screwed up a bit when selecting my mortgage.

Basically, I had assumed the early redemption fees would fall as I progressed through my 5 year fixed period, giving me greater flexibility as time passed. A quick call to Santander today appears to suggest this isn't the case. So even after paying front loaded interest payments they also want to pull my pants down on the way out... great.

My situation has changed and it may well be that I need to step out of the housing market for a while. It appears I will be absolutely hammered by ERFs if I chose to do this.

Any options (besides porting) in these circumstances?

Sarnie

8,025 posts

208 months

Monday 15th September 2014
quotequote all
None. If you don't port the mortgage then the ERC's are payable as per your mortgage offer........

DoubleSix

Original Poster:

11,691 posts

175 months

Monday 15th September 2014
quotequote all
Thought you might say that.

Are you surprised that the fee doesn't ratchet down or is that standard stuff?

Sarnie

8,025 posts

208 months

Monday 15th September 2014
quotequote all
Not surprised at all.

I've just had a quick look over a few recent mortgage offers;

Coventry BS's are 5% first two years, 3% next two years, 1% the last year.
Halifax's are 5% for the first year, 4% the next year, down to 1% in the last year.
Virgin Money's are 3.5% for the five years.

DoubleSix

Original Poster:

11,691 posts

175 months

Monday 15th September 2014
quotequote all
So most do actually ratchet down then....

TheInternet

4,703 posts

162 months

Monday 15th September 2014
quotequote all
DoubleSix said:
even after paying front loaded interest payments
Do you mean this? Seems odd.

DoubleSix

Original Poster:

11,691 posts

175 months

Monday 15th September 2014
quotequote all
TheInternet said:
DoubleSix said:
even after paying front loaded interest payments
Do you mean this? Seems odd.
Well, unless my terminology is wrong. I understand my payments in the early years are largely made up of interest with the principal repayments increasing as years go by.

Again, why I'm feeling a bit sore to say the least!

Sharted

2,615 posts

142 months

Monday 15th September 2014
quotequote all
Some lenders will return the ERCs to you if you take out a new mortgage within a defined period, say 6 months.

DoubleSix

Original Poster:

11,691 posts

175 months

Monday 15th September 2014
quotequote all
Sharted said:
Some lenders will return the ERCs to you if you take out a new mortgage within a defined period, say 6 months.
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!

Sharted

2,615 posts

142 months

Monday 15th September 2014
quotequote all
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!
Not clear on what you mean by front loaded interest.

Do you refer to early payments being made uop of mainly interest and later ones mainly capital?

DoubleSix

Original Poster:

11,691 posts

175 months

Monday 15th September 2014
quotequote all
Sharted said:
Not clear on what you mean by front loaded interest.

Do you refer to early payments being made uop of mainly interest and later ones mainly capital?
Yes exactly.

Sarnie

8,025 posts

208 months

Monday 15th September 2014
quotequote all
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......

CaptainSlow

13,179 posts

211 months

Monday 15th September 2014
quotequote all
DoubleSix said:
Sharted said:
Not clear on what you mean by front loaded interest.

Do you refer to early payments being made uop of mainly interest and later ones mainly capital?
Yes exactly.
Well, that's just how amortising loans work, the lender hasn't made it up to suit them.

In regards to the mortgage, what are your ERCs, tie in term and how far are you through it?

Sarnie

8,025 posts

208 months

Monday 15th September 2014
quotequote all
Sharted said:
Not clear on what you mean by front loaded interest.

Do you refer to early payments being made uop of mainly interest and later ones mainly capital?
Correct!

If you have a mortgage, dig out your mortgage offer or KFI and there should be a schedule showing the differential between interest & capital changing over the term of the mortgage with more interest being paid at the start....

DoubleSix

Original Poster:

11,691 posts

175 months

Monday 15th September 2014
quotequote all
CaptainSlow said:
DoubleSix said:
Sharted said:
Not clear on what you mean by front loaded interest.

Do you refer to early payments being made uop of mainly interest and later ones mainly capital?
Yes exactly.
Well, that's just how amortising loans work, the lender hasn't made it up to suit them.

In regards to the mortgage, what are your ERCs, tie in term and how far are you through it?
I'm 2.5yrs in to a fixed deal. ERC is 5% which would be hard to swallow despite having reasonable equity in the property...

Sarnie

8,025 posts

208 months

Monday 15th September 2014
quotequote all
Is there any option for you to rent the property out for a few years? Or do you need the equity out of it?

DoubleSix

Original Poster:

11,691 posts

175 months

Monday 15th September 2014
quotequote all
Yeah I suppose. But having first hand experience of it with my flat that prospect doesn't fill me with joy.

Another excuse for the mortgage co to load on the fees etc

I also see the market cooling as rates rise. Need a clean break really...

MagicalTrevor

6,476 posts

228 months

Monday 15th September 2014
quotequote all
I recently got shafted by Santander with this, just didn't think about it when we remortgaged!

It was a case of either lose the house we wanted or suck it up and pay ~£5k.

Life's too short!

DoubleSix

Original Poster:

11,691 posts

175 months

Monday 15th September 2014
quotequote all
I hear you. It's just in my case it's more like 22k which is a lot to hand over to a large corporation that has enjoyed a tonne of interest in the last two and half years. We need every penny right now.

Just don't feel my mortgage advisor really rammed this home.

My fault though, before anyone kindly points that out. smile

TheInternet

4,703 posts

162 months

Monday 15th September 2014
quotequote all
DoubleSix said:
I work in finance so am not completely naïve to these issues
Despite the above it seems like you haven't looked at the detail of the product and don't understand how the interest is calculated. Sounds like a frustrating situation nonetheless.