Early Repayment Charges - what they are and how they work
An Early Repayment Charge (ERC) may be due if you pay back all, or sometimes part, of your loan (over and above your normal monthly payments) within a particular date of starting the mortgage. Most of our residential mortgages, however, allow you to repay up to 10% of the original loan each year, with no ERC. Any charge that is made is calculated as a percentage.
For example, if you borrow £100,000 and you have an ERC of 3% for four years but a 10% ERC allowance:
- you could pay up to £10,000 per year over and above your normal monthly payments in each of the first four years without any charge
- if you were to pay more than this in any one year, say £15,000, then you would pay a charge of 3% on the amount you have paid over your allowance. In this case 3% of £5,000, which is £150
- if you pay your mortgage in full within the ERC period there will be a charge of 3% of the balance of the mortgage at the date of redemption. Assuming in this case your balance was the same as your original loan when you repay your mortgage (£100,000), you would be charged £3,000
- if the mortgage is repaid in full after the ERC period, only interest up to the end of the month of redemption will be payable.
Remember to check the 'Our Mortgage Products' section for ERC details relating to the mortgage you choose.
If you move house
Skipton mortgage products are usually 'portable' - so you can transfer your product to the mortgage on your new home, and you will not be charged an ERC for that product as long as you complete your new mortgage and repay your old one at the same time. (If the balance of the loan on that product is reduced when you move you may have to pay an ERC on the reduction). Of course, both you and your new property must fulfil Skipton's lending criteria at the time of your move in order for a new mortgage to be approved. Depending on the loan to value of your new property, you may have to pay a higher lending charge at that time.
APRs
APR stands for Annual Percentage Rate which is the overall cost of your mortgage expressed in a standardised way. This helps you compare the cost of different loans over the whole term. It may seem obvious, but a loan with a lower APR is cheaper overall than a loan with a higher APR.
An APR for each product is shown in the 'Our Mortgage Products' to help explain the total cost for comparison purposes. However, your Key Facts Illustration (KFI) will include the APR specific to your own loan requirements, which may differ slightly from the APR shown in the 'Mortgage Rate and Features Guide'.
The APR in the KFI takes account, amongst other things, of:
- the amount borrowed and the term of the loan
- the interest rate you pay (including the rate you pay after any initial product period)
- charges which you have to pay, such as application/completion fees, valuation fees and discharge fees
- when and how often you have to pay the interest and charges
- any Higher Lending Charge.
It is important to be aware that APRs are only a snapshot of the total cost of a loan at a particular time. All the known information is included in the calculation, such as the current levels of interest rates and charges and any planned changes such as the ending of incentive periods, and then worked out over the term.
What APRs cannot predict are changes in the Residential Standard Variable Rate (RSVR) throughout the term and the effect of any other charges that might occur, such as overpayments.
Whilst using APRs to compare the cost of different loans, don't forget to consider how much you will have to pay each month and whether you can afford that amount.
If you can see a situation arising where you are likely to be unable to make your monthly mortgage repayments, or are unable to make the payments on the agreed monthly date, or you are unable to make any payments, maybe due to redundancy, then it is most important that you talk to us as soon as possible.
Call the Collections Team directly on 0845 850 1766*
Or call us for an appointment at your local branch on 08457 171 777*
We will then work with you to see what can be done for the best - the earlier you get in touch the better.
Useful Links:
Here are some links that you may find useful:
Treating Customers Fairly In Arrears
If you are having trouble paying your mortgage, we will try to help you. This explains how we will treat you fairly, and what steps you should take to help yourself.
We will
- Contact you as soon as possible to discuss your problem.
- Talk to an agency which gives debt advice (for example, Citizens' Advice), if you want us to.
- Give you reasonable time to pay back the debt.
- Only start proceedings to repossess your home if we cannot solve the problem with you.
We might be able to
- Arrange a new payment plan with you, taking your and our interests into account.
- Change the way you make your payments, or the date you make them.
- Allow you to pay back your mortgage over a longer period of time (which would reduce your monthly payments).
- Change the type of mortgage.
If we cannot offer you any of these options, we will tell you why. If we can make one of these arrangements with you, we will explain how it would work and give you time to consider it. If we cannot offer any of these options, we might agree to you remaining in the property to sell the property yourself depending on your circumstances.
What you can do to help us
- Tell us as soon as possible if you are having problems repaying your mortgage or think that you might experience problems shortly.
- Seek debt advice if you would like help with managing your finances.
- Contact us quickly, if we try to contact you.
- Make sure you keep any other people paying the mortgage, and anyone guaranteeing the mortgage, up to date with what is happening.
- Keep to the payment plan we agree with you, or tell us if there is a change in your circumstances which may affect the arrangement. If you do not make the agreed payments, we might have to go to court to get back any money you owe us, or to repossess your property.
- Check whether you can get any state benefits or tax credits which could help to increase your income.
- If you have an insurance policy, check whether it would help with your payments.
- Tell us if you move to a new address.
You may want to talk to a professional adviser, such as a debt counsellor or a lawyer, before you change your mortgage arrangements. We would strongly advise that you seek independent, free, debt advice.
Costs and charges
If you are in arrears, we may charge you for reasonable administrative and legal costs. We will tell you the amount you will have to pay.
If we cannot agree on a solution
- We may send a debt counsellor to see you to discuss your financial circumstances, and the cost of the visit may be charged to your mortgage account.
- We may go to court to start proceedings to repossess your home. If proceedings take place, we strongly recommend that you attend the court and that you seek independent debt advice.
- Starting court proceedings does not necessarily mean that we will repossess your home. We will keep trying to solve the problem with you. Possession is a last resort.
- Before we repossess your home, we will give you advice about getting in touch with your local authority to see if they can find you somewhere else to live.
If we repossess your home
- We will sell it for the best price we can reasonably get. We will try to sell it as soon as possible.
- We will give you reasonable time to take your possessions from your home.
- We will use the money raised from selling your home to pay your mortgage and any other loans or charges.
- If there is any money left over, we will pay it to you.
If selling your home does not raise enough money to pay off the mortgage
- If there is not enough money from the sale to pay the whole mortgage, you will still owe us the amount that is left (a shortfall debt). We will tell you what this is as soon as possible.
- If you bought your home with other borrowers, each of you is responsible for all the money borrowed. This is true even if you normally only pay part of the mortgage.
- We will contact you within six years of selling your property (five years in Scotland) to arrange for you to pay back what you still owe.
- We will take account of your income and outgoings when we arrange a payment plan for this shortfall debt with you. But if we cannot arrange a suitable plan, we may go to court to get our money back. You might have to pay additional court costs.
- If a shortfall debt is not paid, it could affect whether you are able to get credit in future.
Complaints
If you do not think we have treated you fairly, your initial concerns should be addressed to:
Customer Relations Team
Skipton Building Society
The Bailey
Skipton
North Yorkshire
BD23 1DN
If you prefer you may telephone our Customer Service team on 0845 850 17 00 or you can visit any one of our branches.
- We will send you a written acknowledgement within five working days of receiving your complaint.
- Your concerns will be fully investigated by a Customer Relations Officer within the Customer Relations team and a detailed response issued within four weeks of receiving your complaint.
- If we do not hear from you further within eight weeks we will assume our response has addressed the matter and close our file.
If your complaint is not dealt with to your satisfaction, you may then take it to the Financial Ombudsman. The Financial Ombudsman Service provides a free and independent service for consumers, and can be contacted at:
The Financial Ombudsman Service
South Quay Plaza
183 Marsh
Wall London E14 9SR
Phone: 0845 080 1800
Other issues
Some companies may offer you new loans or even invite you to sell your property to them and then lease it back as a way of resolving your short term financial difficulty. Please be careful, as such actions may not be in your long term best interests. We would advise you to seek independent advice before entering into any arrangement of this type.
You may be thinking about handing your keys over to us. If you do this, you will still owe us any outstanding debt, and we would advise you to discuss this option with us before taking such action.
Below are some of the costs associated with a mortgage application that you need to be aware of:
Application fee
An administration/arrangement charge payable upon application. This fee is non-refundable and may vary between products.
Valuation fee
You will be required to pay for a report to establish the value of the property. Most lenders will require this report before making the loan available.
If you are purchasing a property, please contact us if you require a Home Buyers Report or a Building Survey. A mortgage valuation alone may not be suitable for your needs.
CHAPS
It is our practice to send the mortgage advance to your conveyancer by CHAPS, and the charge of £25 will be debited to your account, or to avoid incurring further interest charges, you can pay it on completion.
Completion fee
This covers our work in the setting up of the mortgage - when the money to buy your new home is released to the seller or when your remortgage completes. After this, you can move in! This fee will be added to your mortgage on completion and will incur interest as part of the loan, or to avoid incurring further interest, you can pay it on completion.
This fee is product specific, and may vary between products.
Deposit
You will need to find the difference between the amount you are borrowing and the price of the property. This is likely to be the biggest expense for first-time buyers. Buyers already on the property ladder, who have a house to sell at the same time, are likely to use some of the equity built up in the house being sold.
Conveyancing costs
You will need to employ a conveyancer (solicitor or licensed conveyancer) to handle the legal aspects of buying your home or remortgage, if this is with the aid of a mortgage. The conveyancer usually acts for you and the lender.
The costs your conveyancer deals with on a purchase, which you will be required to pay, include:
- Stamp Duty Land Tax: a tiered government tax on the price you pay for your home on properties starting at a value of £120,000
- search costs - the cost for carrying out searches on your behalf such as with the Local Authority and Land Registry.
Your conveyancer will also charge you for the work they carry out such as:
- dealing with enquiries
- drafting contract for sale/reviewing contract on purchase
- confirming legal boundaries
- arranging completion/preparing the document which transfers legal ownership.