Early repayment charges: what they mean for your mortgage

An early repayment charge is a fee that may apply if you repay, overpay, or switch your mortgage before a certain point.

These charges are often linked to fixed-rate mortgages and other discounted or tracker deals. They usually apply during an agreed period, such as a 2-year or 5-year fixed rate.

For borrowers, early repayment charges matter because they can affect the cost of overpaying, remortgaging, moving home, or clearing a mortgage early.

What is an early repayment charge?

An early repayment charge, often shortened to ERC, is a fee your lender may charge if you repay part or all of your mortgage earlier than agreed.

This usually applies during a fixed rate, tracker, or discounted mortgage period. In simple terms, the lender gives you a specific deal for a set period, and the ERC is part of the lender’s terms if you leave or reduce the mortgage early.

An ERC does not always mean you should avoid making changes. However, it does mean you need to check the numbers carefully before switching, overpaying, or repaying the mortgage in full.

When early repayment charges may apply

Early repayment charges can apply in several common situations.

You may face an ERC if you:

• switch to a new mortgage deal before your current deal ends
• remortgage to another lender during your ERC period
• repay your mortgage in full early
• make overpayments above your lender’s annual allowance
• sell your home and repay the mortgage
• move home and do not port your existing mortgage correctly

The exact rules depend on your lender and mortgage product. Some charges are simple, while others depend on timing, balance, product type, and how much you repay.

Before making a change, it is worth checking your mortgage offer or asking your lender to confirm whether an ERC applies.

Example: how an early repayment charge can apply

This example shows how an early repayment charge can affect the cost of repaying, switching, or overpaying before your current deal ends.

If you wanted to repay the mortgage, switch lender, or overpay beyond your allowance while the charge still applies, the lender may charge this fee.

In this example, the £7,500 charge would need to be weighed against the reason for acting early.

How early repayment charges are calculated

Early repayment charges are usually worked out as a percentage of the amount being repaid.

The percentage may reduce as you move through the deal period.

For example, a fixed rate deal might be reduced like this:

This is only an example. The actual charge depends on your mortgage product and lender terms.

How early repayment charges affect mortgage overpayments

Many mortgages allow you to overpay by a set amount each year without triggering an early repayment charge.

This allowance is often based on a percentage of the mortgage balance, although the exact limit depends on the lender and mortgage product.

If you overpay above the allowed amount, an early repayment charge may apply to the excess.

Before making an overpayment, it helps to check:

• how much you can overpay each year
• whether the allowance resets each year
• whether the allowance is based on the original balance or the current balance
• what charge applies if you go over the limit

How early repayment charges affect remortgaging

Early repayment charges can also matter when you remortgage.

If you remortgage before your current deal ends, you may need to pay a charge to leave your existing mortgage early.

Sometimes, switching early can still make sense if the savings are greater than the cost. In other cases, the charge may outweigh the benefit.

This is why timing matters. Many borrowers start reviewing their options before their current deal ends, so they can avoid switching too early or moving onto a higher standard variable rate.

What borrowers often misunderstand about early repayment charges

Early repayment charges can be confusing because they do not apply in every situation. The key is understanding when the charge applies, how much flexibility you still have, and what your lender’s rules allow.

An ERC does not always stop you from overpaying

An early repayment charge does not always mean you cannot overpay.

Many mortgages allow a limited amount of overpayment each year without charge. The issue is usually whether you go above the lender’s allowance.

The charge can reduce over time

Some early repayment charges reduce as the deal gets closer to its end date.

This means the cost of leaving in year one may be different from the cost of leaving in year four. In some cases, waiting a little longer could reduce the charge.

Porting does not remove every risk

If you move home, you may be able to port your mortgage to the new property.

However, porting is still subject to lender approval, affordability checks, property checks, and the lender’s rules. If the mortgage is repaid instead, an early repayment charge may still need to be considered.

How to make sense of early repayment charges

Early repayment charges can affect the cost of changing your mortgage before the deal period ends.

The key is to check when the charge applies, how much it could be, and whether the benefit of acting early outweighs the cost.

Before overpaying, remortgaging, switching, or repaying early, review your mortgage offer and lender rules carefully. This can help you avoid unexpected charges and make a clearer decision.

In some cases, waiting may be the better option. In others, making a change can still make sense once the charge, timing, and potential saving are compared properly.