Mortgages

caveman · 30-06-2007, 19:51

Some advice please. If you take a fixed rate mortgage say for 3 years at 5%. Then at the end of that term you are told that you are obliged to continue that rate at the societies normal rate say 7%.
Can you just automatically switch to another or the same societies fixed rate or are there penalties. If so on Ãƒâ€šÃ‚Â£120000 mortgage what would you imagine to be the penalty.

Pedro1 · 30-06-2007, 20:34

Before switching, you should check your mortgage agreement to see whether you would have to pay redemption fees. These penalty charges could be expensive (up to 4% of the outstanding amount you owe). It's also advisable to get independent financial advice before you decide to make any changes to your mortgage arrangements. However, if you want to switch to a new deal with the same lender, you may be able to negotiate over the penalties.

You may find that even if there are penalties, they may be balanced out by lower monthly payments. Do your calculations carefully.

Kneebs · 30-06-2007, 20:36

It depends on what the tie in period is - on some it can be just for the period of the fixed rate scheme - 3 years, then you're free to move to who you want without penalty. Others have tie in periods where it'll be 6% for the scheme duration, then reduce by 1% each year - some I've looked at you'd end up having to pay a fee for upto 9 years from taking the mortgatge.

Basically, they're all different so you'd have to have a more detailed look into it - moneysupermarket, moneyextra etc have a 'more info' button which will tell you the details.

There will always be a 'release fee' though, no matter when you switch mortgages.

caveman · 30-06-2007, 20:49

Thanks for info

etccarmageddon · 30-06-2007, 22:09

some mortgages have a thing called an 'over hang' - that's where the redemption penalty continues after the fixed rate or capped rate period - ie. when the SVR starts.

Charlie_Bubble · 30-06-2007, 23:25

If your mortgage company is anything like mine, about 2 or 3 months before it is due to end they will send you another offer. This will usually give you a few choices of different fixed rate terms and the option to just revert to their normal variable interest rate. If you choose to ignore their new offers and take the variable rate, then you should be free to look around at others companies offers.

Pedro1 · 01-07-2007, 02:04

If only all company's were like yours.

Pedro1 · 01-07-2007, 06:41

What i mean is... Some are very hard faced.