Mortgage Sorter | How to avoid paying an early redemption penalty

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.

• Extended redemption penalties

Some mortgages come with an extended redemption penalty,also known as an extended tie-in.

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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Important note about your credit rating

Many websites don't make it clear that filling in their mortgage enquiry form means you might be credit checked.

This can put you at risk.

UK Mortgage lenders may assume an enquiry you have aleady made to another lender means you were turned down - and not that you are in fact carefully shopping around and rejecting the bad deals.

The best way around this significant problem is to ask an independent mortgage adviser to make anonymous enquiries for you.

Without risking your credit score an adviser can find you the best available mortgage deal. They will also know how likely you are to be accepted by the lender if you decide to make a formal application.

If you would like a recommended adviser to check out the best deals for you, anonymously, simply fill in the quick form below.

" Hmm..." You might think; "Won't I be hounded by a salesman hungry for my business? "

This is the most common question we hear from our users.

The answer is no you won't.

Firstly your enquiry is only passed to ONE person on a carefully vetted list of independent advisers.

Secondly, these mortgage advisers are professionals. Even when the market is slow they are busy people. There many people who need to move homes, or get a remortgage and are looking for advice all the time. Regardless of the state of the property market, life goes on.

So the advisers don't have time to hassle people. It just doesn't work like that. No one is gong to be forced into taking out a mortgage unless they really need one.

The advisers are very used to talking with people, perhaps like yourself, who are only "dipping their toes" into the water.

Many people just want an initial quick chat and if they feel comfortable will ask the advisor to contact them again later - often in several weeks or months. As a professional, the adviser will simply diarise this and call back at the appropriate time. There is no obligation at all.

(In the unlikely event that you ever feel at all "hassled" by someone on our list please let us know immediately. We have never heard of this. But if it happened we would definitely want to know).

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How to avoid paying an early redemption penalty

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Important note about your credit rating

How to get a Mortgage in the UK

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