MORTGAGE GUIDANCE
Some mortgages can charge a borrower for repaying all or part of the mortgage, or changing the arrangement, during a specified period. Whether an early repayment charge applies and how it is calculated depends on the mortgage terms.
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Your home may be repossessed if you do not keep up repayments on your mortgage.
What is an early repayment charge?
An early repayment charge, often called an ERC, is a charge that may apply when certain changes or repayments are made during a period specified in the mortgage terms.
Repaying the mortgage early
An ERC may apply if the mortgage is repaid during the applicable charge period.
Remortgaging
Moving to another mortgage can involve repaying the existing mortgage and may therefore trigger an ERC.
Making large overpayments
Payments above any applicable overpayment allowance may potentially result in a charge.
When might an ERC apply?
Circumstances can include repaying a mortgage before the end of a deal period, remortgaging to another lender, making overpayments above an applicable allowance, or potentially changing the mortgage arrangement in other ways covered by its terms. The mortgage documentation determines whether a charge actually applies.
How are early repayment charges calculated?
There is no single universal calculation. Some ERCs may be calculated as a percentage of the relevant mortgage balance or repayment amount, and the applicable percentage can sometimes change during the charge period.
Check your mortgage offer or ask your lender for the exact ERC that would apply before making a decision.
Can I overpay without paying an ERC?
Some mortgages permit a certain amount of overpayment without an ERC, but allowances and rules vary. Check your own mortgage terms before making a significant overpayment.
Learn about mortgage overpayments
What happens if I want to remortgage before my deal ends?
You can investigate remortgaging before an existing deal ends, but an ERC may affect the economics of switching at that point. Comparing the actual mortgage rates, charges and timing matters.
Potential cost of leaving early
Consider any ERC and other costs associated with changing mortgage.
Potential effect of a new mortgage
A different mortgage may have different rates, fees, terms and monthly payments.
Do early repayment charges reduce over time?
Some mortgage products have ERCs that reduce during the applicable period, while others may use a different structure. Check your mortgage documentation for the detail that applies to your mortgage.
What if I’m moving home?
Moving home does not automatically mean an ERC disappears. Some mortgages may be portable, subject to lender criteria, affordability, property suitability and the terms of the mortgage. Porting does not necessarily mean simply transferring the existing mortgage unchanged.
What does porting a mortgage mean?
Mortgage porting is where a lender may allow an existing mortgage arrangement to move to a new property, subject to its terms and checks. It may be relevant where an ERC exists.
When does the ERC period end?
The relevant dates should be stated in the mortgage documentation. Do not assume an ERC period ends on the same date as another mortgage event without checking the actual terms.
Could waiting until the ERC ends make a difference?
Delaying a change may avoid or reduce an ERC in some circumstances, but waiting also means remaining on the existing mortgage arrangement for longer. The relevant comparison depends on mortgage rates, charges, timing and individual circumstances.
Can a mortgage adviser help?
An adviser can help someone assess available mortgage options and understand mortgage costs relevant to a potential remortgage or move within the scope of their service. An adviser cannot make an ERC disappear where it is contractually payable, but can take it into account when comparing options.
What should I check before changing my mortgage?
Outstanding mortgage balance
Current interest rate
Date any ERC period ends
Current ERC amount
Available overpayment allowance
New mortgage rate and fees
Valuation, legal or other switching costs where relevant
Whether moving home is planned
Early repayment charge FAQs
What is an early repayment charge?
How do I know if my mortgage has an ERC?
How much is an early repayment charge?
Do ERCs reduce over time?
Can I overpay my mortgage without an ERC?
Do I pay an ERC if I remortgage?
Do I pay an ERC if I move home?
What happens when my ERC period ends?
Thinking about changing your mortgage?
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Your home may be repossessed if you do not keep up repayments on your mortgage.
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