A redemption penalty is a penalty that you must pay if you redeem your mortgage before the agreed date, which is usually longer than you want to keep the mortgage for. Fixed rate and discount mortgage offers will often have redemption fees to cover the cost of providing such a competitive rate but if you are going to go for a deal like this they can also be advantageous. Itâ€™s important to look at the total cost of having that mortgage from the time you take it out to the time you expect to redeem it and compare that cost against deals without redemption fees. You may find that fixed rate deals offer a better total cost for you even if they have a high redemption at the end.
At the time of buying a home many people are in financially weak positions, investing possibly years of savings into property therefore a bit of cash back can always come in handy for moving in expenses. It is important to remember though, if you get cash out of your mortgage you will be paying it back for longer; For every Â£500 you borrow on cash back it is likely you will pay back Â£1000 or more over the total life of the mortgage so it is worth considering other forms of debt for your short term needs if possible.
Overhang is a term used where a mortgage still ties you in by not allowing you to repay the loan in full at the end of the special offer period but without sometimes heavy penalties.
Mortgage Indemnity Charge (M.I.G)
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