How long is the Early Repayment Charge Period?

The ERC Period varies depending on the mortgage product, however, for fixed term mortgage products the period is normally linked to the interest incentive period. For example, on a 3 year fixed rate product, you can expect this period to coincide with when the fixed rate period expires, i.e. 3 years.

Can I avoid early repayment charge?

You can get around these charges on mortgages by staying with the same lender. However, this does limit the products you can choose from. If you are only 6-12 months early, you can also ask your lender if you can repay it early free of charge. Not all lenders will allow this. Speak to the lender's redemption or repayment department and get their authority to waive your ERC in writing.

Is it worth repaying loan early?

If you are on an expensive Standard Variable Rate (SVR), then the repayment charge may be less than the amount you will save in interest, by switching to a lower rate mortgage. Our mortgage brokers can help you find a better deal and calculate the savings you could make against your current lenders early repayment charge.

Mortgage Early Repayment Charges explained by SAM Conveyancing

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Early Repayment Charge

by:

Andrew Boast

(Last Updated: 09/06/2022)

Created on:

09/06/2022

Read by:

11,901

6 min read

Key Takeaways

If you decide to repay your mortgage early, you will be charged extra for it.
This charge can be fixed, or tiered - meaning it will decrease during different times of your mortgage period

What is early repayment charge?

Most mortgage products include within their terms an Early Repayment Charge (ERC), which is payable if you repay your mortgage within the early repayment period. The period of time normally ties into an incentive period, such as a fixed rate of 2, 3 or 5 years, so if you repay your mortgage, whether in part or in full during this period, then the mortgage lender will charge you an additional cost.

Mortgage lenders have secured the funds for a set period of time and they expect you to repay that money over the pre-agreed mortgage term. When the mortgage is repaid early the mortgage lenders incur a cost and as such the ERC compensates mortgage lenders for this.

Do I have to pay early repayment charge if I remortgage?

The charge can be considerable, which often means you are locked into the mortgage for a period of time. If you decide to remortgage early, there are ways you can avoid paying the ERC.

How to calculate early repayment charge?

The ERC varies depending on your mortgage product, however lenders normally charge either a:

Fixed fee - which is a fixed ERC percentage that runs for the life of the mortgage product; or a
Tiered fee - which has different ERC percentages for different times during the mortgage term.

Here are some examples:

These are examples and mortgage lenders charge different ERCs depending on the specific mortgage product.

Bank	Term	Rates
Bank Barclays Bank PLC (trading as The Woolwich)	Term -	Rates 3% of the amount repaid
Bank Halifax Bank Plc	Term First 2 years - ERC applies	Rates First year - 1.30% of the amount repaid Second year - 0.80% of the amount repaid
Bank HSBC Bank Plc	Term -	Rates 1.00% of the amount repaid for each remaining year of the charge period.
Bank Leeds Building Society	Term First 2 years	Rates First year - 3% of the outstanding balance Second year - 2% of the outstanding balance
Bank Metro Bank Plc	Term First 5 years	Rates First year - 5% of the amount repaid Second year - 4% of the amount repaid Third year - 3% of the amount repaid Fourth year - 2% of the amount repaid Fifth year - 1% of the amount repaid
Bank National Westminster Bank Plc	Term First 5 years	Rates First year - 5% of the amount repaid Second year - 4% of the amount repaid Third year - 3% of the amount repaid Fourth year - 2% of the amount repaid Fifth year - 1% of the amount repaid
Bank Nationwide Building Society	Term First 2 years	Rates First year - 2% of the amount repaid Second year - 1% of the amount repaid
Bank Virgin Money	Term -	Rates 1.50% of the outstanding loan

Do you need help to remortgage early?

We have a specialist remortgage department with mortgage brokers and dedicated remortgage conveyancing solicitors. Our team is ready to help, so you can get in touch or you can book an appointment with our broker.

Get in touch with our team

Mortgage with no early repayment charge?

Depending on the product you choose, you might not have to pay this charge if you decide to pay your mortgage off early. The mortgage products that don't charge often have an 'Exit or Redemption fee' to pay which can range between £50 and £500. To check to see if you have a mortgage with no repayment charge you should review your original mortgage offer and it should state something like this:

Early Repayment Charge (ending your mortgage)

There are no charges if you wish to repay this mortgage, although a mortgage exit fee is payable. The current level of this fee is £125.

Do mortgage overpayments trigger the ERC?

Mortgage lenders normally allow you to make overpayments to reduce the mortgage debt, however, this can often be restricted to a certain amount, which is normally linked to the remaining mortgage debt. For example**:

Halifax Bank Plc You are able to make overpayments to this mortgage, at any time, subject to any ERC detailed in the early repayment section above. Sometimes you may be offered the opportunity to make lump sum or regular overpayments without having to pay an ERC. Details of any current offers, which can change from time to time, can be found in the 'Information about your mortgage' booklet issued with mortgage offers.

HSBC Bank Plc A capital reduction of 10% per annum can be made without incurring an ERC. This will apply throughout the early repayment charge period.

Coventry Building Society trading as Godiva Mortgages For this mortgage, there are no restrictions on the amount that can be overpaid on this mortgage.

Barclays Bank Plc trading as The Woolwich A capital reduction of 10% per annum can be made without incurring an ERC. This will apply throughout the early repayment charge period.

Leeds Building Society You can make additional capital lump sum payments of up to 10% per year without incurring the ERC.

Metro Bank Plc We will only accept overpayments of £500 or more. You can make overpayments up to 20% of the amount borrowed in each 12 month period.

Virgin Money During the ERC period you are allowed to make overpayments of up to 10% of the outstanding balance, in each calendar year, without incurring an ERC. In the year that your mortgage product commences, the 10% allowance will be calculated from the original loan balance. In subsequent years, the 10% allowance will be calculated from the balance as of 31st December of each calendar year.

Nationwide Building Society If you make overpayments totalling more than 10% of the original loan advance amount (the Overpayment Allowance), during the ERC period(s) shown in section 10, you will be charged an Early Repayment Charge.

National Westminster Bank Plc You can overpay a maximum of 10% of your outstanding mortgage balance in each 12 month period commencing on completion of your mortgage and continuing from each anniversary of that date until the end date of this rate, without incurring an ERC. If your mortgage is made up of more than one part you can overpay up to a maximum of 10% of the outstanding balance of each part. An ERC will be incurred on any overpayment that exceeds the annual 10% limit.

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** These are examples and mortgage lenders allow different overpayment amounts depending on the specific mortgage product.

Written by: Andrew Boast

Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.

Reviewed by: Caragh Bailey

Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.

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