I’ve lived in Burnley for many years and worked in real estate for decades so I know a thing or two about local mortgages. One thing that can confuse people is Early Repayment Charges (ERCs). They may impact your money plan. In this guide, I will explain ERCs in simple terms and help you manage them in the best way possible when dealing with Burnley mortgages.
Let’s start with what Early Repayment Charges (ERCs) are: they are a fee you may have to pay if you want to pay back some or all of your mortgage loan before it’s due. Lenders often charge ERCs during the first incentive period of fixed-rate, tracker or discount mortgage products. They do this to recover their invested funds as originally agreed upon in the interest.
Knowing about ERCs is important if you are thinking about over-paying or refinancing your loan. Details about ERCs should be in your mortgage contract and each lender’s terms and conditions can vary. In Burnley and elsewhere in the UK, ERCs usually range from 1% to 5% of the amount you pay back early, and they decrease over time.
If you want to repay your mortgage ahead of time, be sure to weigh the costs against the benefits. Sometimes, the cost of ERCs can be more than the interest you might save. Try to get some advice so that you know you’re making a good choice. Also, keep in mind that some mortgages do not have ERCs, so if you’re planning to over-pay, look for a mortgage that doesn’t charge you extra for paying early.
Another thing you may want to consider is the ERC-free allowance some lenders offer. This means that you can pay a percentage of your mortgage back early without paying any ERCs. These payments can be in one lump sum or regular payments. However, you’ll have to check how much you’re allowed to pay back early with your lender. This can vary but is usually between 5% and 10%.
People sometimes repay their mortgage early to switch to a better deal. But, you need to remember to account for the ERC. The savings you’d get from the new lender should be more than any ERCs you may be charged. Another option is to wait until your ERC period is over, especially if it’s nearly finished. When deciding what to do with your mortgage, make sure you understand all the details of your contract, including ERCs. This helps you make smart choices about your money.
To sum up, knowing your way around Early Repayment Charges can save you money on your Burnley mortgage. Understanding ERCs helps you make smarter choices about your money and make a good plan for paying back your mortgage. It’s always a good idea to talk with your lender and maybe even get some advice from an independent financial advisor. Don’t forget, as a local real estate professional, I’m always here to help answer any questions you have about owning a home in Burnley.