What Is an Early Repayment Charge on a UK Mortgage?
This guide is for general information only and does not provide financial advice. Check your lender’s terms before overpaying, as early repayment charges may apply. Your home may be repossessed if you do not keep up repayments on your mortgage.
An early repayment charge (ERC) is a fee some UK lenders charge if you repay more of your mortgage than they allow during a fixed or discounted rate period. It is sometimes called a redemption charge. Whether you have one, and how much it is, depends on your lender and your deal, so your mortgage offer is the place to check.
This guide explains the idea. To estimate a charge with your own figures, use our early repayment charge calculator. For how the yearly limit works, see the UK mortgage overpayment cap.
When an early repayment charge may apply
- Overpaying above your yearly allowance during a fixed or discounted rate. Many lenders let you overpay up to a set amount, for example 10% of the balance, without a charge.
- Repaying the whole mortgage early, for example when you sell or remortgage before your deal ends.
- Leaving a deal early to switch to another lender or product.
Some lenders do not charge an ERC once the deal period ends, and some do, so check your offer.
How an early repayment charge is usually worked out
An ERC is usually a percentage of the amount you repay early, and the percentage may be higher earlier in a deal and lower as the deal nears its end. Some lenders apply the percentage only to the amount above your allowance, and some apply it to the whole amount repaid early. Your mortgage offer sets out the percentage and how it is applied.
As an illustration, take a £200,000 balance and a 10% yearly allowance, which is £20,000. If you overpay £25,000 in a mortgage year, that is £5,000 over the allowance. If a lender charged 3% on the amount over the allowance, the charge would be £150. The percentages below are for illustration only and are not typical figures: charges vary by lender and deal, and can be higher or lower.
| Charge percentage | Estimated charge on £5,000 |
|---|---|
| 2% | £100 |
| 3% | £150 |
| 4% | £200 |
Figures are estimates from this site’s early repayment charge calculator and assume the charge applies only to the amount over the allowance.
How to find out whether you have one
- Look in your mortgage offer and the illustration you were given when you took the deal out.
- Check your annual mortgage statement or your online account.
- Ask your lender, and ask for the answer in writing if you are planning a large payment.
Ways people avoid or reduce a charge
- Staying within the yearly overpayment allowance.
- Waiting until the deal period ends before making a large payment or switching.
- Asking your lender whether your mortgage can move with you if you are selling and buying.
Whether any of these suits you depends on your lender and your circumstances. If you are unsure, consider speaking to a regulated mortgage adviser. Our guide to whether it is worth paying an early repayment charge looks at the trade-off.
Questions people ask
Do all mortgages have early repayment charges?
No. Many fixed and discounted-rate deals have them, and some other deals do too, while some lenders do not charge one once the deal period ends. Your mortgage offer says whether one applies to you.
Is an early repayment charge the same as an exit fee?
No. An exit or administration fee is a separate fee some lenders charge when a mortgage ends. An early repayment charge is about repaying more than your allowance, or repaying early, during a deal. Check your mortgage offer for both.
Can I avoid an early repayment charge?
Often you can avoid one by staying within your lender’s yearly overpayment allowance, or by waiting until your deal period ends. Ask your lender before you make a large payment or switch, because the rules vary.
Where to go next
See overpaying during a fixed rate and when your overpayment allowance resets.