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Letter E
Early redemption payment or early redemption penalty
This is a fee charged by a lender if a borrower redeems a mortgage prior to a
certain date as laid down in the original mortgage deed. It is necessary for
lenders to have penalties to ensure they have an opportunity to recover their
costs on the particular deal that they give you.
Lenders normally have redemption penalties on mortgage that give some sort of
benefit such as a discount or fixed rate etc. These penalties differ from lender
to lender and from deal to deal but are generally for the term of the fix or
discount and usually represent a percentage of the mortgage or a multiple of
monthly interest.
Some lenders charge penalties beyond the term of the deal. With this in mind it
is imperative to ensure you are aware of the penalty and its terms and you are
happy with it.
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