What’s My Redemption Figure?
When you've borrowed money from a lender to buy your house, your outstanding balance is known as your redemption figure. This is the total cost you’ll need to take into account if you need to pay off your mortgage early, re-mortgage or get a new mortgage elsewhere.
If you’ve bought a house and you’re anything like most of us in the UK, it’s pretty likely you’ll have borrowed money from a lender in order to get it. Your mortgage will get you to pay back the cost they’ve lent you in monthly increments over an extended period of time, and if you’ve managed to keep these monthly payments low, you can use the rest to make some home improvements if that’s what you fancy.
As with all loans, there might be a chance that your circumstances change and you’d like to pay it off early. While this sounds quite idyllic, it’s important to note that mortgage providers will actually charge you an extra fee if this is what you decide to do. This, combined with the outstanding balance on your mortgage is called a redemption figure, and it’s an important bit of info you’ll need to take into account when choosing your mortgage in the first place.
A redemption cost applies if you’re choosing to pay off your mortgage completely (lucky you!). It also comes into play if you’re re-mortgaging your property or need to apply for a new mortgage. In this case, the redemption charge applies if you’re not able to move your existing one over to your new home, which is also known as “porting” your mortgage.
What is a redemption figure?
A redemption figure is the total cost you’ll need to take into account if you need to pay off your mortgage early, re-mortgage or get a new mortgage elsewhere. The redemption figure may include, on top of the remaining balance that’s on your statement, penalty charges depending on how long you’ve been making payments, and administration charges to cover the time taken to close your account.
Certain redemption costs might not apply if you’ve been paying into your mortgage for a long time, so it’s important to check to see when this period might be. This might actually make it cheaper for you to wait a few months before choosing to pay the mortgage off, leaving you some nice extra cash to splash on your new home or save for a rainy day.
You might even be able to avoid the costs altogether if you’re moving house, as if you’d like to use your existing lender for your new property, you can transfer the terms over.
If you’re looking to move home and want a rundown of all the extra costs you’ll need to take into account (as well as a redemption figure!), take a read of my guide on making sure moving house is affordable.
Why do I need to pay extra?
As with all loans, you’re borrowing money based on a pre-agreed contract. This contract means you’ve agreed to pay off a sum of money over a certain period of time, accruing a certain amount of interest over the years.
Paying the loan off early means the mortgage provider will lose out on those costs you’ve agreed to, and they’ll also need to spend time on administration for closing off your account within a different timeframe. Often, your redemption figure will include costs to cover these.
How do I find out my mortgage redemption figure?
You can find out your mortgage redemption figure by simply asking your lender.
You can ask before choosing them for your new home, as the additional costs might be a deciding factor for you between two providers. You can also ask them once you’ve gone ahead with the mortgage, so you can get an idea of what you’ll need to pay if your situation changes. This is usually pretty simple, and many mortgage providers offer Internet services that can make it even easier. If all else fails – just pick up the phone!
How can I help?
If you’re looking to buy a new home and need help finding the best mortgage to suit your needs, you’re in luck – I’m Gareth (but you can call me Big G), an estate agent and mortgage adviser based in Worcester. I’ve got oodles of experience in the home buying process, from mortgages to moving fees. This means I can help you decide on the best course of action for your next step on the property ladder.
To find out more about how I can help you purchase your next home, just give me a call on 01905 416000 and I can go over the process with you.