Avoiding Early Repayment Charges Whilst Raising Additional Funds

This customer needed to raise money, but found that disturbing their existing mortgage incurred hefty redemption charges...

The challenge

The customer was part-way through a major home improvement project when they unexpectedly ran short of funds. With contractors threatening to leave the project unless payment was made within four weeks, there was significant pressure to secure finance quickly.

However, the customer was only 12 months into a 5-year fixed rate mortgage. Remortgaging their existing lender would have triggered an early repayment charge of more than £14,000. To make matters more difficult, the level of borrowing required was around 10 times the customer’s annual income, leaving them concerned they may have to sell the property in an unfinished condition.

The solution

Rather than disturbing the existing mortgage and incurring substantial penalties, a second charge mortgage was arranged alongside the current lender. This enabled the customer to raise the additional funds required whilst keeping their low fixed rate mortgage in place.

The second charge loan was secured on a 5-year fixed rate with no early repayment charges, providing both payment certainty and flexibility for the future. Once the existing mortgage fixed rate period ends, the customer will have the option to review their borrowing arrangements more economically.

Funds were released within three weeks, allowing the customer to continue the project without disruption and avoid unnecessary financial penalties.