Early redemption penalty

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    Early redemption penalty

    If you were getting out of buy to let would you consider paying a 4% early redemption penalty fee on a mortgage of 100k?
    I’ve still got 3 years left on a 5 year deal but I am likely to want to sell the property when tenant is finally evicted.
    any thoughts ?

    Only you can make the decision whether the penalty is worth it. It depends on what other use you have for the cash, what pressure there is to sell, what interest rate you are avoiding. None of which we know. If you are currently paying 10% interest, could use the cash to overpay another loan and have inside information about some stockmarket investment, and believe that property prices will fall by 25% in the next 3 years -- the answer is yes.


      I did just that last year. I paid an early redemption penalty of 3% because I had an empty property that I didn't want to let again. The value had risen quite a lot so it didn't hurt so much and it was a nice tax deduction.


        Would you consider renting it out again for the remaining 3 years or would that be too risky with section 21 possibly being abolished?
        Or maybe you could get the mortgage ported on to another property


          Porting of the loan to another property is only allowed if the terms of the mortgage clearly stated at the outset , not every lender has this as a key feature of their product offerings so I would urge you to check you Letter of Offer and the Illustration which would have been provided prior to the application being submitted either by the lender or the broker.


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