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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

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Original poster

Avoiding mortgage Early Repayment Charge

62 replies

Mumof3confused · 19/07/2022 13:46

In the process of selling house as part of divorce. We will have 2 months worth of fixed rate left and the penalty for paying off mortgage early is £9k

The actual interest due in those two months is £1k or so. We can’t remortgage/move mortgage to one of us for various reasons but I have tried that.

Has anyone successfully managed to reduce their ERC or is that a total no-go?

The mortgage is with Santander if that makes any difference.

OP posts:

RoastingMarshmallow · 19/07/2022 13:59

We ported our mortgage for this reason on our last place. We were borrowing more to move so took out a second mortgage for the remaining amount we needed and had both due to remortgage at the same time i.e one had two years remaining (of 5) and the other was a two year mortgage so we would remortgage and consolidate simultaneously. We had to pay the penalty fee but on completion of moving and porting the mortgage we received it back as a cheque.

Speak to a mortgage advisor who can organise it for you and look at your situation.

KellynchHall · 19/07/2022 14:00

Can you not wait two months until you exchange? It might annoy your buyers but you could offer a small discount for their inconvenience.

RoastingMarshmallow · 19/07/2022 14:02

Also just to add when we moved the mortgage with 2 years remaining was in my DHs name but the new property and mortgage was in both our names so I assume there is a way to do it following a divorce.

CapMarvel · 19/07/2022 14:04

It's worth a shout but I think you are pushing your luck for the charge to be reduced.

I would be tempted to see if you can hold off exchanging for a couple of months, perhaps offering a discount to your buyers.

LoisPlane · 19/07/2022 14:05

Look at the Financial Ombudsmen.

There are examples of cases where they have upheld a reduction in ERP's.

I would request it in writing, whilst quoting some FOS outcomes to reiterate that this is viewed as a reasonable request.

Original poster

Mumof3confused · 19/07/2022 14:06

I don’t really want to wait for various reasons. That’s great tips re financial ombudsman! Thank you.

OP posts:

MsFrenchie · 19/07/2022 14:10

LoisPlane · 19/07/2022 14:05

Look at the Financial Ombudsmen.

There are examples of cases where they have upheld a reduction in ERP's.

I would request it in writing, whilst quoting some FOS outcomes to reiterate that this is viewed as a reasonable request.

Do you have a link to those cases? These clauses are normally water-tight.

The charges generally represent the lender’s own charges for breaking the deal.

Sprig1 · 19/07/2022 14:10

Why should you benefit from the lower rate but not pay the associated fee for leaving early. You might not want to delay things by 8 weeks but it is the only sensible answer (or suck it up and pay the fee).

larkstar · 19/07/2022 14:59

I'm not with this - why does the mortgage have to paid off just because you are selling? Can't you just keep it going?

Tiani4 · 19/07/2022 15:02

My mortgage early redemption charge reduced each year so the less time left the less the early repayment amount. I'm sure you've checked OP but definitely worth a conversation with the mortgage company

ThreeLittleDots · 19/07/2022 15:08

Is it definitely 9K? It's tiered depending on how long you've got left. Is this the figure given in the redemption statement?

Icanstillrecallourlastsummer · 19/07/2022 15:08

Legally they will have the right to do what it says in the contract. Some are reducing, some are not.

However, you can appeal to their better nature and they may waive or reduce it as a goodwill gesture. Perhaps write a real sob story to them....

Icanstillrecallourlastsummer · 19/07/2022 15:09

larkstar · 19/07/2022 14:59

I'm not with this - why does the mortgage have to paid off just because you are selling? Can't you just keep it going?

The mortgage is secured by the house. When you don't have the house anymore you can't have the mortgage. The only way she can delay so as to not incur it is by delaying completion.

coodawoodashooda · 19/07/2022 15:18

How did they work out 9k? I'd love to get mine paid off early. Can't afford it yet but am trying to overpay where I can.

Starseeking · 19/07/2022 15:19

Similar happened to me last year. I understand why you can't wait; neither could I for various reasons, including high risk of emotionally abusive EXDP not signing house release papers as he had no incentive to do so.

Sale completed in July 2021, fixed period due to end in September 2021. ERC of £9.5k incurred.

Santander said I could have ERC back as long as I completed my new (sole name) mortgage under porting as long as completion of new house took place within 6 months (it was 3 months before Covid).

Vendor pulled out of sale after 7 months, and I'm currently buying another place which should complete 13 months after previous house sale. I plan to write a letter to Santander citing Covid, delays with previous vendor which can be certified my estate agent, and hopefully get my almost £10k back.

Not sure if there's much you can do when you don't actually take a new product with them, sorry.

DashboardConfessional · 19/07/2022 15:25

That is a massive ERC in the last year. Is it 2% of £450k or 1% of £900k? If it's already 1% then the only way I can think the reduce it is if you can overpay by 10% before you move with any savings/assets you're splitting, but that will be minimal. Otherwise, you either port it or pay up.

EllenWaiteourkid · 19/07/2022 15:25

We cleared the mortgage seven years ago and then took out a small mortgage to do the kitchen and bathroom, we had been in the house fifteen years and we could never afford to do them.

Anyway.....

We borrowed £40k the deal is not up until next year, thankfully FD allow you to overpay as much as you like, we now owe them £50 and our repayments are somewhere in the region of £2.50

They want £600 to let us out of the deal early, they are not getting it, it is costing them more to service the last £50 but I am not paying the £600 they can jog on.

So £2.50 a month until next year, works for me.

Reasonistreason · 19/07/2022 15:49

I also have a fixed rate mortgage with Santander. Our ERC started out as £5000 and remains that for whole duration of term, in our case 5 years. No reducing terms as with our previous lender.

MoltenLasagne · 19/07/2022 15:57

You should be able to get out of it or at least heavily reduce it - early repayment charges are supposed to be a fair reflection of the cost to the mortgage provider of cancelling their hedging early not just a penalty fee (those were ruled unfair a long while back).

At the moment, cutting short a hedge on mortgage should actually leave them better off rather than incur them costs (apart from an hours work for staff at a push).

I'd ask them for the breakdown of the early repayment charge and what costs they will incur to make it a fair reflection of what you should pay. Make sure they know you will escalate to the ombudsman. Good luck.

Original poster

Mumof3confused · 19/07/2022 16:38

Thanks everyone. Of course I know what I signed and I may just have to suck it up, but considering their charges are not reduced over the years as most other lenders, the ERC of 5% does seem disproportionate. Most other banks go down to 1% at this point. The actual loss to them is £1k interest + admin costs. Considering the current climate, divorce etc I thought it would be worth a shot and just wanted to know if anyone had done it, if so the best approach.

As for potential solutions, paying off 10%, porting mortgage, taking out another product etc…I’ve explored all of this already.

OP posts:

PicaK · 19/07/2022 16:41

They are very inflexible. My term is due to end on 2nd Sept. Which is a Friday and a great day to complete and move house. But no. I'm eligible for the whole £13k if I complete the sale and repay on that day. So annoying.

ThreeLittleDots · 19/07/2022 16:43

Ah jeez. I'll definitely avoid Santander in the future.

HelloHeathcliffeItsMe · 19/07/2022 16:44

5% is very high...how long have you had the mortgage?

Hotandbothereds · 19/07/2022 16:55

EllenWaiteourkid · 19/07/2022 15:25

We cleared the mortgage seven years ago and then took out a small mortgage to do the kitchen and bathroom, we had been in the house fifteen years and we could never afford to do them.

Anyway.....

We borrowed £40k the deal is not up until next year, thankfully FD allow you to overpay as much as you like, we now owe them £50 and our repayments are somewhere in the region of £2.50

They want £600 to let us out of the deal early, they are not getting it, it is costing them more to service the last £50 but I am not paying the £600 they can jog on.

So £2.50 a month until next year, works for me.

My parents did this!

They had the money to pay the mortgage off but were quoted £££ early redemption fee - my mum sorted it to pay something like a fiver a month until the end of the term which was about 3 years rather than pay it.

SofiaSoFar · 19/07/2022 16:57

ThreeLittleDots · 19/07/2022 15:08

Is it definitely 9K? It's tiered depending on how long you've got left. Is this the figure given in the redemption statement?

You can't state that as fact.

They're not always tiered; some are the same from day 1 until the end of the clause period.

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