Avoiding mortgage Early Repayment Charge

[Mumof3confused]

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.

@lookleft the early termination charge IS the pre estimate of the loss of the customer breaching the contract by leaving before the minimum term. And the parties can’t agree an etc if it is not a genuine pre estimate.

it may entirely be true that it is justified because the only reason the price could be offered was because of an etc calculated at that level - but nonetheless that is the test that will be applied to assess it.

I am surprised to hear that a non tapered etc has been considered acceptable but I don’t have detailed knowledge of how mortgage rates are calculated in this situation.

I still think it’s worth going to the omb and taking it the whoLet way - often companies will settle to avoid an omb decision

Santander (and other big banks) won’t (settle). They know the previous legal cases and ombudsmen decisions around ERCs go in their favour.

My lender was not on a sliding scale and Also 5% and unfortunately due to many annoying and other. Dramatic reasons I had to complete a sale 15 DAYS before the end of my fixed term and I appealed to the bank and to the ombudsman and got nowhere!!!! Paid several thousand pounds for the sake of 15 days!

What other posters have said is correct - basically ombudsman said that the charges were advertised clearly, I accept them at point of mortgage and wasn’t a test of if was fair in terms of risk / cost etc if that make sense. Good luck with it and I hope you get a different response to me, long long process also. Worth a go tho!I had solicitor sibling using all the lingo etc in my letters but ahh to no avail!

Oh I’ve just had a quick look at the omb site - frankly I’m really surprised at their position. I struggle to see how these sorts of outcomes are either fair or reasonable.

although probably not that surprised. I do
think the oversight of financial bodies in the uk is very compromised.

good luck OP - sounds like no matter what happens you’re on your way out of a crappy situation!!

As a pp said, you have to let their complaints process complete fully which they have 8 weeks to do, before you have the right to refer to fos, their investigations can then take months so you will not get out of this before the 8 weeks going down this route, and they will know this.

So I faced this with Santander when trying to remortgage to sole mortgage in my own name due to relationship breakdown!! They would not accept me as a single lender but also wanted to charge me 5% to move to a lender who would.

Went all the way to the Ombudsman and they found in Santander’s favour.

Ironically am now taking out a different mortgage 5 years later and specifically requested one with a reducing ERC. The broker made a joke about “oh you don’t want a Santander style ERC then”, I said “funny you should say that” and basically turns out Santander have the highest and strictest ERC in the entire market. I will never borrow from them again, they are a NIGHTMARE!

sorry I can’t be more helpful, but I would definitely delay completion if you can!

Please could you link to this?

This is very similar to my situation. According to my mortgage adviser they’d lend me double what I’m asking for if only my business was at least 2 years old (I have a Ltd Co). Ironically it will be 2 years old 2 months post completion and I’ve got the accountant stating on their certificate that profits so far this year are extremely healthy with an increase on the previous very successful year. Still the computer said no because the business hasn’t been established for long enough so they have discounted that income completely instead of offering me smaller mortgage that I have asked for. I will never use Santander again for sure.

As I said earlier, I have a Santander mortgage with a non decreasing ERC. To be fair, my mortgage broker made this very, very clear before accepting the mortgage offer. The rate on offer was very competitive at the time. Obviously no one knows how their circumstances will change so it's a bit of a gamble.

FOS don’t ‘oversee’ financial institutions- they’re independent arbitrators. Decisions on the legality and fairness of ERCs are long established (both there and in the courts). They aren’t penalties they are part of the pricing structure and contract of the mortgage, so they apply regardless of when redemption occurs. Again, with it them, there wouldn’t be a lower fixed period so would pay more overall.

Fos are independent independent adjudicators but they also underuse monitoring and feedback of the behaviour of financial institutions and, as such, are a part of the breeder regime of oversight of financial institutions.

ercs are liquidated damages for breaching the cost tract by leaving early. The whole point is indeed that can’t be penalties - ie the bank can’t make a profit and be in a better off position because of the early termination than it otherwise would be.

i remain surprised that a non tapered erc has been found to be acceptable. It seems to me that the bank is unlikely to suffer a loss of £9k because of a termination two months before the end date. But indeed there may be way in which the pricing for its wholesale funding that makes it so. But it does seem odd to me.