Lately the mortgage lenders have been charging more for mortgage exit fees than UK residents are realizing. These higher fees are making it more difficult for the borrower to actually close out the account of the mortgage. So how do mortgage exit fees work?
First for a mortgage exit fee dissimilation you must understand what one is. The mortgage exit fee is a fee you are charged when you finish paying off the mortgage and go to close the account. In other words when you are ready to close the mortgage as the term has ended or you have the money to pay off the remaining amount of the mortgage you are given what is called a mortgage payoff amount that includes the mortgage exit fee. You must pay the entire amount the mortgage company says you owe. Another term for mortgage exit fee is a mortgage exit administration fee in which the staff, legal, and administration costs of closing the mortgage are made. It should also be mentioned that these fees are charged when you change the registration of a property at the land registry. The mortgage exit fee is not associated with the arrangement fees of the loan, which is a good thing to know so that you don’t get confused.
The mortgage exit fee has a particular format in that any early redemption penalties cannot be reclaimed. In other words if you close out the mortgage account early and you have a clause stating that you will be charged for the close out of the account with a penalty charge you must also pay those charges. You will not be able to regain these penalty fees as the agreement clearly states there is an early payment penalty. You can reclaim certain mortgage exit administration fees. These fees are charged when you pay off the loan or switch to a different mortgage, and as long as you don’t have a special redemption penalty in the mortgage you can reclaim them.
So why can you get your money back? First the Financial Services Authority found the cost of mortgage exit fees is exceedingly high in the last few years. To justify the expenses the lenders had to find a clause that would give a just reason for the high fees. If the lenders could not find those justifications then those who were charged more than seemed proper could file to get some of the money back.
Lenders have in some areas justified the added expenses in saying that it is a plan to offer competitive rates in the mortgage market. The interest rates offered were low and there for they found that they needed to increase other areas. Of course the lenders also said the exit fees were kept low, but the FSA found this to be untrue.
Since the FSA stepped in there are ways for you to get your money back in a refund. To file for a refund you must contact the lending company you paid the fees to. You can either write a letter or make a call. The lenders have been offering interest on top of the exit fee so you can even get a little more back than you originally lost. It is not an automatic thing for you to get the return interest, but if you ask for it you will generally be able to get the interest as well.
You also have another choice when you try to reclaim the mortgage exit fee. Most of the lenders have been giving a percentage as well as some interest. However, if you feel it is your due you can pursue the lending company for all of the money. First you should realize that the FSA is not asking that the entire amount be returned, but a percentage of what is fair. In other words the FSA has established a fair mortgage exit fee that you must pay and anything above that you can obtain by calling the lender company. However, you can still try to reclaim more of the charges. You need to contact the lending company and argue for the amount you will get back. Most believe 50 pounds is a fair fee for the mortgage exit fee for the cost to the lender so you can write a letter to the lender and ask them to justify anything over that amount. If the lender refuses you can try a small claims court action.
If you have a current mortgage you should be told the mortgage exit fee amount. The FSA has regulated the fee now so any mortgage that you obtained after February 2007 should have the mortgage exit fee listed on the paperwork you signed. Of course if you find that the mortgage is still too old for that information you can call the company and ask their policy and current fee.