Redemption (breakage) cost

P

Prudy

Guest
Hi. I made the mistake of entering into a 10-year fixed rate for my mortgage. I'll have two years done by June.

The problem is a wonderful situation has come up where I have to sell the house in a year's time, leaving me with a little over 7 years on the fixed mortgage. I didn't think anything like this could come up, hence entering into a safe fixed rate.

I'm well aware of the redemption fee. By my calculation, it will cost me between €8,000 to €10,000 to break my mortgage and pay off the balance with the bank.

Is there any way I can avoid this? I'm pretty certain I'm grasping at straws here, but if anyone has any advice I can legally stand on, I would really really appreciate it.

I rang the bank and asked if I could avoid paying the fee because I am selling on the property, that I'm not just paying off the mortgage and then staying in the house. He said that it makes no difference because I'm still essentially paying off the loan.

Any advice? Thanks.
 
What does your original mortgage agreement say? If it confirms the bank's position, then I don't think you have a case.

I think the position differs between lenders, so some posters may have different experiences to yours.

One way around this is to threaten to withdraw your business from the bank (current accounts, credit cards, mortgage on new property etc.) if they don't accomodate you in some way. Make an appointment with your local bank manager. If they value your business, they may make an offer. If not, redeem the mortgage pay the €10k, and walk.
 
The bank is not just being greedy. They have entered into a contract as well to get that money at that cost for the 10 years so that they can give it to you. It will cost the bank to get out of their agreement so I do not think that they can let you off scot free. They may reduce it for you because the probably have some margin built in to the sum.
 
You say you've calculated the cost to be between E8k and E10k - have you asked your bank? On the basis that the 10 year fixed rate hasn't reduced since two years ago it could be the case that there will be no penalty or if there is I suspect it may be considerably less than you believe.

Best of luck.....

BM
 
Bank Manager said:
You say you've calculated the cost to be between E8k and E10k - have you asked your bank? On the basis that the 10 year fixed rate hasn't reduced since two years ago it could be the case that there will be no penalty or if there is I suspect it may be considerably less than you believe.

Best of luck.....

BM
Click to expand...

I'd agree you should ask the bank for their calculation.

Also do Irish banks allow you to move the fixed rate mortgage onto another property (not sure if this would apply anyway to the OP depends whether he is selling to trade up/sideways). I know it happens in other countries but I am unsure of the Irish position.
 
Thanks for all your replies. I hope that my calculation is wrong indeed and that it will be much much less by the time I do sell or even better, nothing at all. I hope!

I wish I had another property to transfer the mortgage on to, but it's only the one house. I'm moving out of the country and need the proceeds from the sale to fund my next move.

As of now, with no real figures of what I will eventually owe, I'm just consoling myself with the fact that the move is more important than the money that I'll lose.
 
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