Moving and escaping early repayment charges

A reader from Norfolk wants to downsize but is worried about being caught by early repayment charges on his mortgage.

Thomas Khirrecu, independent mortgage adviser at Beacon Asset Management, Beacon Asset Management takes him through the problem and what it means to his finances.

Aaron from Norwich asks:

In about a year and half, we want to move to the north-west. We can probably sell our current home for around £160,000 and buy a new one for around £130,000.

Can we transfer our Nationwide mortgage (base rate tracker) and still release the equity: £30,000 minus all costs?

We have an early repayment penalty until December 2009, but may move before then.

Thomas from Beacon Asset Management responds:

In order to give you a definite answer to your problem, we would ideally need some further information from you, for example, what are the Early Repayment Charges (ERC) on the products.

Also, are you planning to keep the same mortgage amount or planning to decrease the loan?

However, working from the information we have already got, if you kept the same mortgage, you could port your existing mortgage to the new property, which would save you from incurring any ERCs. The balance of £30,000 could then be used to help pay for the costs associated with the move.

If, however, you have decreased the mortgage by any amount, you are still free to ‘port’ the existing mortgage, but would incur ERCs on the balance.

I would advise you to visit an Independent Financial Adviser with all of the relevant information regarding your mortgage to hand. Once they have all of the relevant information they will then be able to advise you of the best solution for your situation.

b>If you have a question for Thomas, go to the myfinances.co.uk Ask the Mortgage Expert section.

For more information on the issues discussed here, go to Beacon Asset Management .

Beacon Asset Management is authorised and regulated by the Financial Services Authority.