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Mortgage exit fees can push up the cost of the best deals Go compare with our comparison table

Mortgage exit fees can push up the cost of the best deals

06 August 2010 / by Rachael Stiles

A mortgage might boast a best buy interest rate, but borrowers should also consider any early redemption charges which can make them expensive to get out of, suggests HSBC.

Early redemption charges (ERC) can vary wildly between mortgage lenders, by as much as £6,090, the bank has warned, based on a typical £150,000 repayment mortgage which is redeemed 12 months early.

While interest rates are predicted to remain low for years to come, some mortgage industry experts are suggesting borrowers should opt for longer-term fixed rate mortgages, but HSBC urges them to check the total costs, as it might be more expensive to switch to a cheaper rate than to just keep repaying the mortgage on their existing rate.

HSBC investigated the exit fees of some of the top mortgage lenders and found some charge £1,500 for early redemption within 12 months of the fixed period ending, while others charge as much as £7,590.

Commenting on the findings, Martijn van der Heijden, head HSBC mortgages, said: "It is essential that borrowers check behind headline rates for high exit and redemption fees.

"Although most borrowers plan to hold onto loans until at least the initial rate comes to an end, unforeseen circumstances can crop up, so choosing a mortgage that won't cost you a fortune to get out of is an important consideration."

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ProviderLTV**CCJsDefaultsBankruptcyIVAMissed Loan Payments* 
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Our View:

"Credit repair mortgage service to help you get back to a high street mortgage deal - If you have suffered a one off event such as divorce, redundancy, serious illness which has resulted in a "bad" credit entry on your credit file over 12 months ago this service will help you get back on track".

Representative Example:

A repayment mortgage of £120,000 payable over 28 years and 1 month initially on a fixed rate for 2 years at 1.99% and then on the lender current variable rate of 3.69% (variable) for the remaining 26 years and 1 month would require 24 monthly payments of £465.20 and 312 monthly payments of £565.39 and one final payment of £565.19.

The total amount payable would be £189,357.67 made up of the loan amount plus interest (£68,161.67), booking fee (£999), completion fee (£30) and valuation fee (£197).

In this example the overall cost for comparison is 3.7% APRC representative.