Exiting a mortgage early

[Artsy]

Hi All,

A quick legal/contract question that some may be able to assist with.

Is it possible in any way to exit a mortgage before the fixed term ends without having to pay a penalty?

I won't go into too much detail but I have a mortgage ending in 2023 (5 year fixed) and I would be much better off exiting and getting a new one but due to the penalty find myself reluctant to do so.

I know I'm probably clutching at straws here but no harm in asking I guess.

Thanks in advance for any replies.

[rev-erend]

Best bet is to call them and ask. They are normally pretty helpful.

[Sten.]

Artsy said:

I would be much better off exiting and getting a new one but due to the penalty find myself reluctant to do so.

Without wishing to state the obvious, that's why the ERC is there.

[ScoobyChris]

rev-erend said:

Best bet is to call them and ask. They are normally pretty helpful.

Or look in the paperwork that was sent out with the mortgage. My 3 year fixed has penalties covering the whole fixed term, but it's a sliding scale so you pay less of a penalty in year 3 than year 1.

Chris

[brillomaster]

you might be able to move across onto a different product without paying the ERC, assuming its with the same lender.

if you want to go for a different lender, then its unlikely you can get out of the ERC. and don't forget legal fees for switching lender too, which might negate some of the benefits of a better rate.

[Artsy]

Thanks All,

As I said, I'm not very hopeful but you never know with these things what experiences others have had.

I'm on a sliding scale too but I haven't slid down enough...

My problem is more the fact that by keeping the mortgage going, I'm also restricted to the same lender for any additional mortgage which also means I'm restricted to capital and interest as opposed to interest only which would suit me at this point in time.

Will check all my options and see how it goes

[CarCrazyDad]

Generally the mortgage termination fee is if you sell and walk away , or leave to another provider.

I believe if you re-mortgage with the same company, you don't have to pay the fee. But the best thing is to check with the provider ... !!!

In addition some companies will "hold" the fee for a period of 6-12-24-36 months , and return it if you take out another mortgage with them later.

EG if you sell and you have a 5% mortgage fee, let's say 10 grand, then you pay that 10 grand fee . But if a year later you come to take out another mortgage with the same provider they may give you £5000 of that back, or some other percentage.

[Artsy]

CarCrazyDad said:

Generally the mortgage termination fee is if you sell and walk away , or leave to another provider.

I believe if you re-mortgage with the same company, you don't have to pay the fee.

In addition some companies will "hold" the fee for a period of 6-12-24-36 months , and return it if you take out another mortgage with them later.

EG if you sell and you have a 5% mortgage fee, let's say 10 grand, then you pay that 10 grand fee . But if a year later you come to take out another mortgage with the same provider they may give you £5000 of that back, or some other percentage.

This is encouraging.

I think I'll give them a call and see what info I can get out of them.

[fooman]

Depends on the specific terms of mortgage, we cleared ours with no penalty, a friend had to reduce his to a trivial amount to avoid exit fees, seemed a smart way of doing it.

[matjk]

The fees can be extremely Punitive, I understand the mortgage company should be reimbursed for lost interest, but in my case I had a minimum fee of £8k on top of lost interest, it’s literally just a charge and according to the FSA this isn’t really allowed, this was with Santander, in the end I just waited the 8 months as I couldn’t be arsed to argue with them.
As said you need to call them to see how much they estimate you need to pay to get out.

[Jeremy-75qq8]

You can ease if a bit. I did recently.

Mine allowed. 10% redemption free of penalty. So I gave them 10% a few days before redemption.

Every little helps !

[joropug]

We had to pay off ours and ally when moving as we needed to borrow more than the provider we were with would let us due to COVID stinginess .

It worked out well though as despite the 5k redemption fee the lower interest means it only cost us £1500 . Also meant we had 1 mortgage not 2 smaller ones that never renewed at the same time, paying 2 product fees etc.

We overpaid to the maximum with spare cash immediately before which slightly reduced the redemption but that’s all we could get.

Renewing with the same provider and fixing in a longer term could see some of that waived if you’re lucky.

[aparna]

I looked up my ERC recently and it's 1% which i thought was pretty reasonable, given that is less than a years interest.

Unless I'm getting my wires crossed.

[meatballs]

Sainsbury's waived our ERC as it was sold as a portable product but they have stopped all new lending as they are leaving the market... So it's not impossible, if there is a good reason.

[tigger1]

joropug said:

Also meant we had 1 mortgage not 2 smaller ones that never renewed at the same time, paying 2 product fees etc.

A bit off-topic, but product fees on a mortgage - its always worth checking that the "fee free" product doesn't work out cheaper. HSBC are beggars for it, 2 versions of 3 year fix, one with, say 2% interest, £999 fee; one with 2.2% interest and no fees. Take the no fee product, overpay 1k in month one, and you're better off than if you'd been on the lower interest rate (I'm making up the numbers so it might not actually work out, but you get the drift) - the 0.3% interest over 3 years doesn't outweigh reducing the balance by a grand in month 1.

[Caddyshack]

Unfortunately lots of wrong answers in this thread.

As a broker of 25 years there is little to no chance at all of getting a lender to roll over on an ERC penalty...it is priced in to the contractual agreement for a reason. No amount of foot stamping will get them to not charge it.

Most deals allow for 10% overpayments per annum so you can reduce the mortgage in chunks but if you exceed that amout then a pro-rata penalty will be payable.

[Caddyshack]

Jonno02 said:

Caddyshack said:

Unfortunately lots of wrong answers in this thread.

As a broker of 25 years there is little to no chance at all of getting a lender to roll over on an ERC penalty...it is priced in to the contractual agreement for a reason. No amount of foot stamping will get them to not charge it.

Most deals allow for 10% overpayments per annum so you can reduce the mortgage in chunks but if you exceed that amout then a pro-rata penalty will be payable.

My experience says otherwise; staying with the same lender. Bank waived ERC as we were taking a new product with them.

Who was the lender? How long ago? I bet they only waived it on renewal of the product under retention in the last 4 months of the current deal (like Santander), lenders will not do it 2 yrs in to a 5 yr fixed for example.

[tigger1]

Caddyshack said:

Jonno02 said:

Caddyshack said:

Unfortunately lots of wrong answers in this thread.

As a broker of 25 years there is little to no chance at all of getting a lender to roll over on an ERC penalty...it is priced in to the contractual agreement for a reason. No amount of foot stamping will get them to not charge it.

Most deals allow for 10% overpayments per annum so you can reduce the mortgage in chunks but if you exceed that amout then a pro-rata penalty will be payable.

My experience says otherwise; staying with the same lender. Bank waived ERC as we were taking a new product with them.

Who was the lender? How long ago? I bet they only waived it on renewal of the product under retention in the last 4 months of the current deal (like Santander), lenders will not do it 2 yrs in to a 5 yr fixed for example.

is that new product for a different property, i.e. porting? Friend has just literally done this with their mortgage as part of a home move (no ERC, even though they did pay off the old mortgage and then take out a new one with same provider)

[Jonno02]

Caddyshack said:

Who was the lender? How long ago? I bet they only waived it on renewal of the product under retention in the last 4 months of the current deal (like Santander), lenders will not do it 2 yrs in to a 5 yr fixed for example.

Just looked back to find out. Halifax, 13 months left of a 3 year product. Early exit fee waived. This was in 2018.

[MustangGT]

I have a Halifax 5 year deal. It clearly says you have no right to transfer, however, they would likely agree to transfer it in the event of a move and would waive the early exit penalty at that point provided you continue to term with the new property.