Don’t fall into this trap
We had a new enquiry today from someone who arranged to borrow extra capital from her mortgage provider in order to buy another house. The decision nearly cost her £5,000.
She decided not to go ahead with the property purchase and asked the mortgage company in question to take back the money she had borrowed. Unfortunately, they said doing so would cost her nearly £5,000 in early redemption charges.
The mistake she had made was not to act quickly enough when she decided not to purchase the property and so did not tell the mortgage company in time. All financial products have a cancellation period, also known as a cooling off period. The length of the cooling off period will depend upon the type of product bought (i.e. investment, life assurance, mortgage, savings etc) but will either be 14 or 30 days. If you inform the company who sold you the product (the provider as opposed to a third party adviser) that you do not wish to proceed with the product within this time frame you will get your money back and not have to pay a penalty (though you may incur investment losses if you have bought such a product).
In this situation the mortgage company were acting within their rights although it may have been better from a customer services point of view to show a bit of understanding and allow her to return the borrowed capital.
In the end we suggested that she save the borrowed capital she has in a savings account until the early redemption period expires at which time she can return it free of charge. She may even be able to find a savings rate to match the mortgage interest rate so that she is no worse off.
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