want out of fixed rate mortgage

Hi, I was hoping for some help. I have a fixed rate mortgage with Ulster Bank until August 2009. I want to sell my house as relocating, but was wondering what the general penalty is for getting out of it. Would we be safer to try and rent out the house for a year? (obviously, just your opinion, but would greatly appreciate any advice). Thanks.

You will have to ask Ulster Bank what the penalty is first.

Are you buying another house? If so, will they let you transfer the fixed rate deal?

This is one of the disadvantages of fixed rate deals. They make it more difficult to sell your home.

Brendan

nina said:

Would we be safer to try and rent out the house for a year?

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If you rent the house out within two years of purchase then a clawback of stamp duty will apply. If you do not dispose of the property within 12 months of moving to a new home then some portion of the total capital gain will be assessable for CGT. If you rent it out then the usual rental income tax and other (e.g. PRTB registration etc.) issues apply. Whether or not renting out is a good idea just to run out the remaining fixed rate period is not an easy question to answer especially in the absence of more detailed info.

Check the terms and conditions of your loan to see how much the penalty will be, or ring the mortgage section of your bank, they will be able to tell you. You could try and negotiate with the bank, another poster was able to get out with no penalty because interest rates have risen and the bank wanted to get out of the fixed low interest rate mortgage. Bare in mind that it may be harder currently and in the future to secure a new mortgage as banks are making it harder to borrow.

Thanks so much for the advice. Appreciated. A little more info. We bought the house 4 years ago. We are not buying another house as we are building on a family site. We are going to rent until the house is built. We will be looking for a mortgage for the new house, but I don't know if it is a good idea to tell ulster bank that or we might be tied to taking it out with them, if they were willing to drop the penalty in exchange. We should have no problem getting a mortgage as site is worth a lot itself and we have savings and both have permanent teaching jobs.

nina said:

We are not buying another house as we are building on a family site. We are going to rent until the house is built.

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Why would you not simply stay in your existing home until you the new build progresses to a stage at which you can look at selling the first one?

We will be looking for a mortgage for the new house, but I don't know if it is a good idea to tell ulster bank that or we might be tied to taking it out with them, if they were willing to drop the penalty in exchange.

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I don't understand. No lender can force you to do business with them. Your best bet is to ask UB what the fixed rate breakage penalty would be now or in coming months. If it is significant then you can start thinking about your options for avoiding or reducing it including negotiating with them.

Have you thought about how you will schedule the sale of the old home and the building of and moving into the new one? Can you afford to service two mortgages at one time or will you need to have sold the old home before you start building or move into the new one?

Some lenders refund the penalty if you take out new mortgage with them. Obviously this would tie you to them for the new mortgage but if you got a good deal and the penalty was large it might be worth it.

We can't stay in this house till our other one is built as we have a baby and want to move home as my mother is going to mind her when I go back to work. I have phoned the bank up and they are letting me know if or what penalty i'll have to pay, in written form. They wouldn't tell me over the phone. Fingers crossed! Thanks for the help.