can anyone pleas tell me if there is a legal way of not paying early repayment charges on a mortgage?

Answer 1

Not that I'm aware of. Until you find out, here's what you do:

You must have the money for early repayment; otherwise you wouldn't be asking the question. You also have an awareness of how long you'll have to wait until you can pay off the mortgage without the early repayment charges, and how much those charges are.

So, let's say the total repayment charge is $5,000 (I'm just making up numbers here; they likely won't look anything like yours.) and you have to wait two years before you can pay without incurring that charge.

Two years is 24 months' worth of payments. Figure out how much interest (not principal!) you'll be paying in the next 24 months -- and let's say for this example that it's $5,400.

So far, so good -- looks like if you pay off now and pay the early repayment charge, you'll be better off by $400.

But wait; what about earning some interest on the payoff money in the next 24 months? Say you throw it in an interest-bearing savings account with a high yield, and only withdraw money to make the mortgage payments. Figure out how much interest that would get you; for our example, let's say you'd end up earning $800 over the 24 months.

Well, now paying off early now will cost you $5,000, but waiting the 24 months (and keeping the money in an interest-bearing account) will cost you $4,600 -- it's now cheaper to wait the 24 months.

Finally, what are the rules of your early repayment charge? Suppose you're allowed to pay extra principal in advance, but you can't pay off the whole loan. Also, assume the interest rate you're paying on the mortgage is higher than you could get in an interest-bearing account.

Your best bet, then, might be to make a huge principal payment now -- but not enough to pay off the whole loan, and just enough so that your 24th payment after this one will pay off the entire loan. Taking this approach, you'll be paying almost entirely principal on the last 24 payments, and you'll avoid the early repayment charge.

You should have the idea by now. Sure, keep looking for a way out of the clause, but in the meantime, figure out the best way to minimize your outlay if you can't get out of the fee -- be creative, but keep it legal and risk-free, and make sure you're fully aware of the terms of the early repayment charge.

Answer 2

How much is the early mortgage repayment charge?
I want to sell my current house and buy a new one, but I don't have enough cash. The cost of the house I want to buy is about 200K. My current property value is 290K (190K is mortgaged). I have only 50K cash in savings and 100K in 401K. My goal is to be mortgage free when I buy a new house. Can anyone recommend a strategy? Greatly appreciated!

Answer 3

Yes, dont take a mortgage from a company that charges this kind of unjustified fee. Tell them you are unhappy about it ask them to remove/refund it. If they won't cooperate take out large ad inlocal paper(or at least threaten to), they may reconsider.

Answer 4

The FSA have just changed the rules to stop them doing this (as of today I think). If you are being charged kick up a stink and go to the Ombudman

Answer 5

No.