Mortgage - Early redemption fees, options?
Discussion
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?
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?
TheInternet said:
DoubleSix said:
even after paying front loaded interest payments
Do you mean this? Seems odd.Again, why I'm feeling a bit sore to say the least!
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!
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.Do you refer to early payments being made uop of mainly interest and later ones mainly capital?
In regards to the mortgage, what are your ERCs, tie in term and how far are you through it?
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.
Just don't feel my mortgage advisor really rammed this home.
My fault though, before anyone kindly points that out.
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
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.
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.
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.
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.
Guys,
I'm not wriggling at all. I was simply seeking some clarification on a detail I was a little surprised by; the lack of a ratchet down over the fixed period.
It is what it is. I can wear it, I'm a big boy. I'm not going to go whinging back to the advisor!
This isn't my first mortgage and I may have been a bit scant on my usual due diligence. But as I hinted at earlier this was all done at a very difficult time when my priorities were elsewhere.
I'm not wriggling at all. I was simply seeking some clarification on a detail I was a little surprised by; the lack of a ratchet down over the fixed period.
It is what it is. I can wear it, I'm a big boy. I'm not going to go whinging back to the advisor!
This isn't my first mortgage and I may have been a bit scant on my usual due diligence. But as I hinted at earlier this was all done at a very difficult time when my priorities were elsewhere.
Edited by DoubleSix on Wednesday 17th September 14:55
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