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  • Mortgages & Finance

    Early Repayment Charge - Lodgers

    If the bank isn't happy with you taking in lodgers and they call in the loan, do you have to pay their early repayment charge?

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    I'll let the mortgage advisers give their opinion on lenders but from a lodger landlord point of view I've never heard of this happening as long as the mortgage is being paid.

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    A good teacher must know the rules; a good pupil, the exceptions.

    Martin H. Fischer


    You need to check the terms and condition of your mortgage, but most banks allow 2 lodgers with no problem at all.

    Banks only call in loans if you do not keep up to date with the mortgage payments, or they find a severe breach of their terms and conditions.

    I have never heard of a bank calling in a loan through someone talking in lodgers.

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    If they are clearly 'lodgers' and not tenants, then I can't see that any bank has grounds to call in the loan. If this is really happening, I'd be interested in knowing which bank it is.

    But to answer your question, I'm sure that they would at least try to charge you any ERCs.

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    At the extreme end of this, if you are in breach then of course the bank can call default and the loan is accelerated to immediate repayment. So it depends on the terms (and any subsequent consents).

    i have never heard of this happening and expect the only time it would happen if you keep up repayments would be if they had regulatory concerns and were themselves going to get into trouble.

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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022

    How many lodgers do you have?

    Is the property considered to be a HMO?

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    Hi,

    If there is an early repayment charge that is still applicable and the loan is called in it could only be a fairly extreme gesture of good for a lender to waive it if someone is in breach of their terms and conditions. Should the ERC period be set to end in the near future I like to think that a lender could be persuaded to waive it or wait until the penalty period ends – but it would depend on the circumstances.

    I hope that helps,

    Cat

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