Money Grouse: Unexpected penalty for early redemption

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The Independent Online
AMRATLAL Patel, a civil servant from Weston-Super- Mare, has a warning for anyone redeeming their mortgage.

Mr Patel had a mortgage for pounds 48,277 with Stroud & Swindon Building Society for about three years.

At the end of last year, Mr Patel decided that he wanted to switch his loan to Lloyds Bank because it offered a much lower rate of interest. His loan carried no redemption penalty.

He requested a statement for redeeming the loan on 30 September which gave him details of the balance outstanding, and informed him that any late payment would incur extra daily interest of pounds 14.44.

He received the cheque from Lloyds Bank early and sent it off to the society. It was cashed on 22 September - eight days before the redemption date.

He immediately began to pay interest on the amount he had borrowed, but he was also continuing to pay interest to Stroud & Swindon until the end of the month - extra interest of pounds 114.

Mr Patel said: 'I wrote to the building society asking for a refund of the eight days' interest, but without success.

'I even wrote to their chief executive, Mr Parker, but was politely told with a copy of the society's rules that it would not be refunded.'

The society said that it was clear in the rules that redemption was calculated from the end of the month.

Mr Patel said: 'The moral of the story is that it is best to post-date the cheque to the end of the month, and then pay the daily rate of interest until the cheque is cleared.'

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