Almost
all fixed
and discount
interest deals come with an early
redemption penalty attached.
You will have to pay this you want to get
out of the deal before the agreed end date
whether it's because you want to move
to a cheaper lender or youve come into
the money to clear your mortgage entirely.
It can cost anything from a
few hundred to several thousand pounds.
There are two types of penalty.
• Penalties that last for
the fixed or discount period
You are unlikely to find a competitive fixed
or discount
deal that doesn't come with a penalty.
On the best deals this lasts for exactly
the length of the special deal which
could be anything from six months to five
or ten years, or even longer.
After that, you will be free to pay off
your loan without penalty.
How to avoid them: You
are unlikely to get a good mortgage deal
without a penalty attached, so the only
way to avoid paying is to stick with it
until the fixed
or discount
period ends.
If you think you might want out before this,
consider taking a shorter deal
say, for two years rather than one that
lasts longer.
This can last for several years after the
cheap fixed or discount interest deal has
ended, tying you into paying the lender's
far higher standard
variable rate.
If you get stuck on a deal like
this, you can end up paying far more over
the tie-in period than you would if you
had taken a deal without an extended tie-in
that charged a higher initial interest rate.
How to avoid them: Always
check if the mortgage you are considering
comes with an extended tie-in.
If it does, think long and hard before you
sign up. No matter how attractive the initial
fixed
or discount
deal might seem, loans like
this are rarely worth having.
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