With many of us forgoing holidays and large items of expenditure this past year, there has been a growing trend towards paying off our mortgages quicker. In fact, 44% of Brits say they have overpaid on their mortgage during the Coronavirus crisis. Most mainstream mortgages will allow overpayments of 10% per year without incurring early repayment charges (ERCs); however, we often arrange bespoke mortgages for clients which build in large, staged repayments – for instance if they are paid in bonuses or they’re repaying a property development loan and the repayment vehicle is the sale of properties, which happens in large tranches.
There are myriad other reasons clients might look to avoid ERCs, and they’re generally tied to flexibility. In our recent case, our clients were looking for an £875,000 remortgage on their main home, valued at £1,475,000. The LTV was 60% which was achievable for our Associate Director Nigel Bedford. However, the main challenge came in finding a mortgage with no ERCs as our clients had an eye on carrying out significant home improvements within the next two years and would need a larger mortgage to fund the works. Therefore, they did not want to get tied into a long-term deal and risk paying the early repayment charges purely to exit the mortgage before the term had ended.
Nigel was able to source a bank which offered a very low initial rate for two years with no ERC, thus giving the clients the security they required for the immediate future, and no long-term ties. They now have the next two years to start putting their renovation plans in place, before potentially signing up to a larger mortgage when they’re ready to put spades in the ground. Flexibility is a wonderful thing!
If you think we might be able to help you secure a mortgage or remortgage, don’t hesitate to contact our team to discuss your individual requirements.