A few years ago mortgage lenders tried to pull a smart one over borrowers. They began raising the exit fees for a mortgage from around £50 to over £200 when the mortgage had started already. This meant borrowers who had signed up with a cheap exit fee were left with nasty surprises when it was time to switch mortgage products or lenders.
Borrowers who paid these fees are reclaiming fees worth hundreds of pounds and if you are one of them you should too.
What are Mortgage exit fees?
Mortgage exit fees are penalties mortgage lenders will charge you for leaving the mortgage early. They are also known as early repayment charges or fees.
How borrowers are reclaiming their mortgage exit fees
They are doing this by essentially challenging the terms and conditions of their agreements.
The terms and conditions of their agreement state that the mortgage exit fees are administrative costs but these charges are indeed penalties for leaving the mortgage.
Borrowers simply contact their previous mortgage providers and ask them to elaborate on the administrative charges that they were charged when they exited the mortgage. Borrowers request this of them in writing so they can get a better understanding of if they are fair at all.
The borrower then informs the mortgage lender that in fact these aren't administrative charges but are rather penalties which aren't in line with their mortgage terms and conditions.
Due to the uprising caused by borrowers requesting a refund on any mortgage exit fees they paid when leaving their mortgages, the Financial conduct authority stepped in and issued guidelines for mortgage lenders which prevented them from increasing the mortgage exit fees throughout the term of the mortgage. This set a precedent and allowed borrowers who had been charged these fees to make an attempt to claim them back.
Steps you should take to claim your mortgage exit fee
Find your original agreement
Finding your original mortgage agreement is the first thing you should do. This will let you know what mortgage exit fee you originally signed up to. If you can't find any documents relating to this you can simply contact the mortgage lender requesting this information in writing.
If the mortgage lender refuses to do this then you can submit a subject access request which will require them to submit all the personal data they hold for you to you. Subject access requests must be complied to within 31 days and some businesses may charge a fee for processing them. You should check the mortgage lenders website for further details.
Once you receive this you will be able to see what the mortgage exit fee you originally signed up for was.
Find your mortgage exit fee(you were charged)
You should check your mortgage statements to see if you were charged any mortgage exit fee. If you cannot find documents relating to the issue then you should contact the mortgage lender in writing asking them if you were charged a mortgage fee and how much. You should also ask them for a copy of your terms and conditions or agreement with them at the time the fee was charged.
Once again, if they refuse to send you these details you can submit a subject access request to the lender which will require them to submit all information they hold on you and provide data to your specific request. In some cases, businesses will request up to £10 to process a subject access request. Subject access requests must be processed within one month.
You should check the mortgage lenders website to see how they deal with subject access requests and what fees are involved. If you have originally filed a subject access request in the previous step then this information on the mortgage exit fee you paid when you left the mortgage lender might already be included there.
Once you are certain that you paid a mortgage exit fee and it was different to the mortgage exit fee on your agreement when you first signed up then you can complain to the mortgage lender.
Complain to the mortgage lender.
You should go to the mortgage lenders website and find their complaints page.
Follow their complaints procedure and submit a claim informing them that the mortgage exit fee was excessive and demand a refund of the difference between what they charged you and what your mortgage exit fee was when you first agreed to the mortgage. Make sure you make reference to the Financial Conduct Authorities guidelines on changing mortgage exit fees.
The lender should give you a decision on your complaint within 8 weeks. If they don't then you can go to the financial ombudsman .
In some cases the mortgage lender will write back to you offering you some money as a good will gesture. You should see how far off this is from the excess mortgage exit fee you were charged and if you want more you can simply write back to the mortgage lender notifying them of the same until you come to a resolution.
Report to the financial ombudsman
If the mortgage lender refuses to respond to your subject access request, complaint or refuses to refund you any of the excess funds then you can take your case to the financial ombudsman. The financial ombudsman are a free impartial service set up by parliament to deal with consumer complaints of financial service businesses.
Before you take your case to the financial ombudsman, they will expect that you will have made a complaint to the mortgage lender and that they would have given you a decision on your complaint.
Can I claim interest on the mortgage exit fee owed to me?
No harm in trying but most mortgage lenders might rebuff your advances or simply become more difficult if you try to claim interest for every year they owed you this refund. You could possible win a case with the financial ombudsman but be aware that cases with the financial ombudsman can take up to one year to come to a conclusion.