On this page
An early repayment charge (ERC) is a charge some lenders apply if you repay all or part of your mortgage, or move to a new lender, before your current deal ends. It exists because fixed and some tracker deals are priced on the basis that you stay for the full term, so leaving early can cost the lender money it planned to recover over that period.
When does an ERC apply?
An ERC typically applies during a fixed-rate deal, and sometimes during a tracker deal, if you:
- remortgage to a new lender before the deal ends
- repay the whole mortgage early, for example after selling the property
- overpay beyond any allowance your deal permits
It doesn’t usually apply once you’ve moved onto the lender’s standard variable rate (SVR), since that isn’t a fixed-term deal. Our guide on what a standard variable rate is explains how the SVR works and why many lenders don’t attach an ERC to it.
| Situation | ERC likely? |
|---|---|
| Leaving a fixed deal early to remortgage elsewhere | Usually, yes |
| Repaying the mortgage in full during a fixed deal | Usually, yes |
| Overpaying within your deal’s allowance | Usually not |
| Staying on the standard variable rate | Usually not |
| Taking a product transfer that starts as your current deal ends | Usually not |
How is an ERC usually structured?
We can’t quote specific figures, since every lender and deal is different, but ERCs are commonly structured as a percentage of the amount being repaid early, and many taper down the longer you’ve held the deal, so leaving in year one of a five-year fixed deal often costs more than leaving in year four. The exact structure, and whether it tapers at all, is set out in your original mortgage offer and annual statement.
How can you check if your mortgage has an ERC?
Your mortgage offer document, from when you took out the deal, sets out any ERC and how it’s calculated. Your annual mortgage statement usually restates this too. If you can’t find either, your lender can tell you what applies and how much notice, if any, you need to give before repaying early.
It’s worth checking this well before you plan to move, since some lenders ask for written notice, and getting an up-to-date figure in writing avoids any confusion later about how much would apply on a given date.
How can you avoid or reduce an ERC?
- Time your move to when the deal ends. If you can wait, arranging your next deal to start as your current one finishes avoids the charge altogether. Many lenders let you arrange a new deal, whether a product transfer or a remortgage, a few months ahead, often 3 to 6 months before the end date.
- Use any overpayment allowance instead of a lump sum. If you want to reduce your balance before the deal ends, check your annual overpayment allowance rather than repaying a larger amount that could trigger a charge.
- Consider a second charge mortgage instead of remortgaging, if you want to raise money without disturbing your main deal. Our guide on what a second charge mortgage is explains this alternative, which usually avoids the ERC on your existing mortgage entirely.
- Weigh the ERC against the benefit of moving. Sometimes a better deal, or an urgent need to raise money, is still worth an ERC. A specialist adviser can help you compare the total cost either way.
Does an ERC apply to the whole mortgage or just part of it?
It depends on what you’re doing. Repaying the whole mortgage, for example by remortgaging to a new lender, usually means the ERC applies to the full outstanding balance. Overpaying beyond your allowance, without repaying the whole mortgage, may mean the charge applies only to the amount above the allowance, though this depends on the wording of your specific deal. Your mortgage offer sets out exactly how it would be calculated in either case.
What if you need to leave a deal early anyway?
Life circumstances, such as needing to sell, separate finances after a relationship change, or an urgent need to raise money, can mean leaving a deal early is unavoidable. In that case, ask your current lender for an up-to-date figure for any ERC before you commit to a new deal elsewhere, so you can compare the full cost, not just the new rate on offer.
What changes if you have adverse credit?
An ERC works the same way regardless of your credit file, but it can shape which option makes more sense if your credit has recently worsened. A product transfer that starts as your current deal ends usually avoids an ERC while also often skipping a full affordability assessment, which can make it a practical choice if a new lender would look closely at recent CCJs, defaults or missed payments. A second charge mortgage is another way to raise money without triggering the ERC on your main deal, though it’s a separate loan assessed on its own terms.
If you’re struggling to keep up with payments and worried about being tied into a deal, contact your lender early. Lenders must treat struggling borrowers fairly and consider options such as a payment arrangement, and free, impartial advice is available from MoneyHelper, StepChange and National Debtline.
Frequently asked questions
Do all mortgages have an early repayment charge?
No. Some deals, particularly those with no fixed period or that are already on the standard variable rate, don't carry one. Others, especially fixed and some tracker deals, usually do for the length of the deal. Check your mortgage offer or annual statement to see whether yours has one.
Can I avoid an ERC by taking a product transfer instead of remortgaging?
Not on its own. An ERC is triggered by leaving your current deal early, whichever route you take next. A product transfer with your existing lender for a new deal starting straight after your current one usually avoids this, because you're not leaving the deal early. See what a product transfer is.
Does overpaying my mortgage trigger an ERC?
It can, if you overpay beyond any allowance your deal permits. Many deals let you overpay a certain amount each year without a charge, which can be a useful way to reduce your balance gradually. Check your mortgage terms or ask your lender before making a larger, one-off overpayment.
Is an ERC the same as an exit fee?
No. An ERC is charged specifically for leaving a deal early, and can be a sizeable amount depending on your balance and how much of the deal remains. An exit or deeds release fee is a smaller, separate administration charge some lenders apply whenever any mortgage ends, whether early or on schedule.