penalty for getting out a fixed mortgage

holdfast

Can anyone give me an idea of what the penalty is for getting out of fixed term mortgage? I have less than a year on the fixed term and the mortgage is 230000

Obelisk29

You need to check your mortgage offer documents - it'll explain how your lending institution calculates early repayment fees.

The penalty is going to be higher the nearer the start of your loan, so if you're less than a year in to a 10 year term, it's likely going to be expensive.

If you want to switch to a varying rate mortgage, have a word with your lender and see if they'll waive some of the penalty.

o29

holdfast

can you explain what you means please. I have 23 years to pay on my mortgage and the fixed part of that loan will only run for another year

eve

What are you circumstances that you want to 'get out of it'? If you are going to pay it all off in one lump sum (maybe you had a windfall) then it will cost you. It will cost you even more if you are still in the fixed term period. If you do have the momey to pay it off it might be cheaper to put the money on deposit for a year and then pay off the mortgage once the fixed term expires.

If you want to move providers or sell the house and buy another, then the rules might be different but you may still have to pay them for leaving in the fixed period.

What the previous poster mean (I think) is that say for example you had a 25 year mortgage that was fixed for 3 years. You would pay a greater penalty for leaving in the 1st year of the fixed term than you would for leaving in the 3rd year of the fixed term

Toots

Also if the interest rate you fixed it at is less than the current interest rate then you might not incur any penalty at all (that is if you're staying with your current mortgage provider) if the fixed rate is higher than the current rate then you will be charged as the bank would make less money out of you by you switching to a lower rate. If this is the case, the bank will work out how much interest you would pay over the remaining amount of time on the fixed rate and that is the penalty you will pay. Do you mind me asking who your mortgage is with?

unclebill98

Ok, insider tip.

If a Mortgage provider issues to you, in writing the penalty notice for paying of a Fixed Mortgage early. Simple ask them in writing what is the exact "cost to the bank", ie, what are the bank loosing in money terms. The penalty might be based on a number of things over a certain period of years, but in fact the actual loss to the bank will be alot less. I just helped someone reduce there fine from 8k to 2.5k.

I'll try find out the exact term used and get back to you.

holdfast

sorry of the missunderstanding. i am not that lucky enough to be paying off my mortgage. but i want to do an extension to the house and want to know how much it would cost me to get out of this fixed rate and switch to another provider. i guess it would be better to go with the bank i have and ask them for another loan,correct ?

unclebill98

Well, that applies to switching mortgages too. Cause you are paying it off early? Your just using another banks money.

Lizzykins

I bought a house in 1993 and got a mortagage of 35k on a fixed rate of 10% for 10 years! Probably from 1994 the rates started to go down and we tried to get out of the mortgage. The penalty was 6k which was EVERY penny of interest that we would have given them had we kept the mortgage for the 10 years. Needless to say I didn't buy that and left the morgage with them until the end of the 10years when I changed lenders. Two morals to the story-don't fix your rate for too long and don't go with B of I for a mortgage.

On looking at the terms and conditions it said that there would be a penalty based on interest rate fluctuations. After that they can blind you with calculations.

unclebill98

Lizzykins wrote: »

On looking at the terms and conditions it said that there would be a penalty based on interest rate fluctuations. After that they can blind you with calculations.

Thats very true, I've seen them just throw figures and calculations etc, but still my post above does work.

mcaul

If the fixed rate you have is lower than the current same term fixed rate, then you probably won't have a penalty to pay.

But rather than go through all the hassle of switching, just ask your bank if they will match the offer of the other lender! - You'll find they probably will.

unclebill98

mcaul wrote: »

If the fixed rate you have is lower than the current same term fixed rate, then you probably won't have a penalty to pay.

But rather than go through all the hassle of switching, just ask your bank if they will match the offer of the other lender! - You'll find they probably will.

Thats very true, most banks have a customer retention unit.

Banks tend not to let you out of fixed rates without imposing some penalty. Even if your staying in house.

I even seen staff stuck on 5% fixed mortgages when the interests rates went down to as low as 2.5%, they where not let swap over.

Lizzykins

I was on 10% and the world and his mother were paying 5% Grrrrrrrr