Early Repayment Charges explained and how we might be able to help
Early Repayment Charges and their effects must always be fully investigated when considering a new mortgage.
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Here we provide a detailed explanation of Early Repayment Charges (or ERC's as you may see them being referred to for short), what they are, how they are incurred, whether its possible or not to avoid them, and how we might be able to assist you.
Table of Contents:
What are Early Repayment Charges?
It is essential that Early Repayment Charges and their effects are investigated when considering a new mortgage. It is therefore always good advice to check the terms and conditions in relation to Early Repayment Charges (ERC), especially where you may be taking advantage of a preferential rate, such as a cashback bonus, a fixed rate or a discount rate.
Why? Well basically it's a case of having your cake and eating it - although you can, provided you don't pay off your mortgage early! If you do, you are likely to incur an Early Repayment Charge, and this can be quite significant.
There are tremendous benefits for the borrower taking advantage of a fixed or discounted rate, or from receiving the proceeds of a cashback. These are genuine giveaways from the lender, but of course the lender will inevitably want something in return, and that's usually your loyalty for as long as possible.
So if you move to another lender, or repay the loan back within a specified period, then you'll undoubtedly incur Early Repayment Charges of between three and six months interest of your mortgage balance! In the case of a cashback, you will be expected to refund all or part of the amount you received if you redeem your mortgage during the first two to five years!
Can it be to my advantage to pay Early Repayment Charges?
You must carefully assess the situation if you are faced with the dilemma of settling an account if it means paying Early Repayment Charges, as these can run into thousands of pounds! However, there are circumstances where it can be beneficial to repay the mortgage, even though you will have to pay these charges for settling early. For example, you may be in a position to switch to a mortgage where the monthly payment is so much lower than you are currently paying, that it will be to your advantage to pay the Early Repayment Charge.
However, there are occasions where you don't have too much choice in the matter!
For example, if you need to move home because of work commitments, and your mortgage is not portable, (in other words your lender will not let you transfer your mortgage to your new home), then you will have little option but to incur the Early Repayment Charges.
Are there ways of avoiding Early Repayment Charges?
The answer is yes, there are ways of avoiding early repayment charges!
For instance, if you need to raise cash secured on your home, but you are currently in a tie-in period with your mortgage, there may be another option. If switching mortgage means that you have to pay thousands of pounds worth of Early Repayment Charges, our Qualified Advisors may be in a position to consider arranging a homeowner loan to run alongside your mortgage. By doing so, we can then provide you with the extra cash you require, without the necessity of incurring the high penalties of repaying your mortgage.
Check the implications of Early Repayment Charges first!
So, if you are considering taking out a mortgage, you should ensure you discuss the implications of any Early Repayment Charges. Naturally, our professionally qualified Mortgage Advisors will always assess your circumstances, needs and aspirations, and will carefully discuss the various options available to you, and explain both the benefits and downsides of them!
Hopefully, we've managed to answer any initial questions you have with regards to Early Repayment Charges. If you need more information on how we might be able to assist, why not get in touch? Our Freephone number is 08000 282 281, and our lines are open from 8am until 10pm, seven days a week, or contact us online at your convenience, we'd love to hear from you!
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The actual rate available will depend upon your circumstances. Written quotations on request.
THINK CAREFULLY BEFORE
SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED
IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
Adding existing debt to your mortgage will increase the repayment term and overall cost.
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