Facing mortgage early repayment charges?

A reader is facing high early repayment charges (ERC) on his mortgage and wants to know if they are fair.

Drawing on years of experience, mortgage adviser Katie Tucker - technical manager at fee-free whole of market mortgage broker charcol.co.uk - takes him through the situation and what it means for his finances.

Raymond from Westcliff-on-Sea asks:

I am being forced to sell my home as my wife left nine months ago and left me with a mountain of debt.

The mortgage company, GE Money, wants over £9,000 to redeem early which would leave me with no equity.

Is this justifiable?

Katie replies:

Dear Raymond,

I'm sorry to say that most mortgages do come with an Early Repayment Charge if you need to get out of them before the initial special-rate deal is finished. Details are outlined in section 10 of your Key Facts Illustration (quote) or the mortgage offer from when you signed up.

You should speak to GE as first port of call, and change your mortgage to interest-only if you have not done so already. Whilst this means they your mortgage debt is not being repaid, you have little choice at this stage. This may help you to leave the sale until the redemption period is up, so that there is no charge.

I'm sure you have attempted to contact your wife to pay half of the debts, but with a mortgage you are both legally liable for the whole debt. Therefore, I must urge you not to miss any mortgage payments as this leaves the worst sort of bad mark on your credit rating.

I would discuss this with your divorce lawyer, as any hardship forced upon you now for the shared debts will help you later when you are arguing over equity.

Best of luck.
If you have a question for Katie, go to the myfinances.co.uk Ask the Mortgage Expert section.

For more information on the issues discussed here, go to mortgage broker charcol.co.uk or call 0800 358 5560.

Charcol Limited is authorised and regulated by the Financial Services Authority (FSA registration number 427339). The FSA does not regulate credit cards, personal loans or some investment mortgage contracts. Some buy-to-let mortgages are regulated by the Consumer Credit Act (CCA).