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Ways to Avoid Mortgage Redemption Penalties: A Guide for UK Home Movers

Posted by RELD on September 26, 2023

**Ways to Avoid Mortgage Redemption Penalties: A Guide for UK Home Movers**


Navigating the world of mortgages can be a complex endeavour, especially when you’re on the move. One of the challenges many home movers face is the dreaded mortgage redemption penalty. This fee can be levied if you decide to pay off your mortgage earlier than the agreed term. But fear not! With careful planning and a bit of knowledge, you can sidestep these penalties and make your move smoother. Here’s how:


**1. Understand Your Mortgage Terms**:

Before anything else, familiarise yourself with the terms of your mortgage agreement. Lenders often include early repayment charges (ERCs) to protect their interest earnings. These charges can vary, so it’s crucial to know when they apply and how much they might cost.


**2. Wait It Out**:

If you’re close to the end of your mortgage’s fixed or discounted period (when penalties typically apply), consider delaying your move slightly. Waiting a few months could save you a significant sum.


**3. Port Your Mortgage**:

Many lenders in the UK offer ‘portable’ mortgages. This means you can transfer your existing mortgage to a new property without incurring penalties. While there might be other fees involved, it often proves cheaper than facing an ERC.


**4. Overpayment Allowances**:

Some mortgage agreements allow for a certain level of overpayment without penalties. This can be a percentage of the outstanding balance annually. By staying within this limit, you can gradually reduce your mortgage without incurring extra charges.


**5. Negotiate with Your Lender**:

Open a line of communication with your lender. If you’ve been a reliable borrower, they might be willing to reduce or even waive the penalty, especially if you’re considering taking out a new mortgage with them for your next home.


**6. Remortgage at the Right Time**:

If you’re considering remortgaging, time it right. Aim to switch at the end of your current deal to avoid ERCs. Keep an eye on the market, and start your research a few months before your current mortgage deal ends.


**7. Professional Advice**:

Consider consulting with a mortgage advisor. These professionals can offer tailored advice, helping you navigate the complexities of your mortgage agreement and potentially saving you from hefty penalties.


**8. Factor in the Penalties**:

If you can’t avoid the penalty, factor it into your moving costs. Sometimes, the benefits of moving (like a higher property value or better living conditions) might outweigh the cost of the penalty.


**9. Read the Fine Print**:

When taking out a new mortgage, especially if you suspect you might move before the term ends, opt for deals with no or low early repayment charges. While these might come with slightly higher rates, the flexibility they offer can be invaluable.


**10. Special Circumstances**:

Some lenders might waive ERCs under special circumstances, such as a change in marital status, job relocation, or unemployment. If you find yourself in a unique situation, it’s worth discussing with your lender.


**In Conclusion**:

Mortgage redemption penalties can be a thorn in the side for home movers in the UK. However, with the right strategies and a proactive approach, they can be managed or even avoided. Remember, knowledge is power. By understanding your mortgage terms and exploring available options, you can make informed decisions that align with your financial well-being. Moving homes is a significant milestone, and with careful planning, you can ensure it’s as financially savvy as it is exciting. Safe moving!

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