What is an Early Repayment Charge?

An Early Repayment Charge (ERC) is a fee a mortgage lender charges if you repay all or part of your mortgage during the fixed-rate period, beyond your allowed overpayment limit (usually 10% per year). It's expressed as a percentage of the outstanding balance and usually tapers down as you get closer to the end of the fix.

How are mortgage ERCs calculated?

ERCs are calculated as a percentage of the outstanding mortgage balance at the date of redemption. A typical 5-year fix might charge 5% in year 1, tapering down by 1% each year to 1% in year 5. Some lenders use flat-rate ERCs throughout the fixed period instead.

Can I overpay my mortgage without paying an ERC?

Usually yes, up to 10% of the outstanding balance per year. Beyond that, the ERC applies to the excess overpayment. Exact allowances vary by lender, check your mortgage offer document.

Do I pay an ERC if I move home?

Not if you port your mortgage to the new property, most lenders allow this with no ERC, as long as completions align. If you sell without porting (or your lender refuses to port), the ERC applies.

When is it worth paying an ERC to remortgage?

When the monthly saving from a new lower rate, multiplied by the months remaining on your current fix, is greater than the ERC cost. Always run the numbers before paying, a broker can do this calculation for you.

Are there any ERC-free mortgages?

Yes. Tracker mortgages and discount mortgages often have no ERC (or much lower ERCs than fixes). Some lenders also offer fixed deals without ERCs at a slightly higher rate. SVR has no ERC.

Does an ERC apply if I die?

Usually no. Most lenders waive ERCs if the mortgage is repaid because the borrower has died. Check the specific terms in your mortgage offer for the exact wording.

Early Repayment Charges (ERCs) Explained

When you take out a fixed-rate mortgage, you're locking in a rate AND committing to stay with that deal for the fixed period, usually 2, 3, 5 or 10 years. If you want to break out early (move home, remortgage to a better rate, repay the mortgage in full), the lender charges an Early Repayment Charge (ERC). Get the maths right and it can still be worth paying. Get it wrong and you'll throw away money you didn't need to spend.

What an ERC actually is

An Early Repayment Charge is a fee charged by your lender when you repay all or part of your mortgage during the fixed period, beyond whatever overpayment allowance the deal includes (usually 10% of the balance per year). To see what overpaying within that allowance could save you, try the mortgage overpayment calculator.

The charge is almost always expressed as a percentage of the outstanding mortgage balance. It exists because the lender priced your fixed rate based on funding the loan for the full fixed term, if you leave early, they don't recover what they expected to.

Typical ERC structures

Most ERCs taper down as you get closer to the end of the fixed period. On a 5-year fix, a common structure looks like this:

On a 2-year fix the taper is more compressed: 2% in year 1, 1% in year 2. On a 10-year fix you might see ERCs as high as 7% in year 1, tapering to 1% in year 10. Exact figures vary by lender and product, check your mortgage offer document.

Year 1: 5% of the outstanding balance.
Year 2: 4% of the outstanding balance.
Year 3: 3% of the outstanding balance.
Year 4: 2% of the outstanding balance.
Year 5: 1% of the outstanding balance.
After fixed period: Zero (you're on SVR, no ERC applies).

What that costs in actual pounds

Take a £200,000 mortgage on a 5-year fix with the structure above. Repay it in full at different points and you pay:

These are not trivial sums. They're also the reason most people don't remortgage mid-fix, until rates fall enough that the saving outweighs the ERC.

Year 1 (5%): £10,000.
Year 2 (4%): £8,000.
Year 3 (3%): £6,000.
Year 4 (2%): £4,000.
Year 5 (1%): £2,000.

When ERCs apply (and when they don't)

ERCs apply when you:

Pay the mortgage off in full mid-fix (selling without porting, or coming into money and redeeming).
Remortgage to a new lender mid-fix.
Overpay above your allowance (usually 10% of the balance per year is allowed without ERC, beyond that, you pay).
Sell the property without porting your mortgage to the new one.

When ERCs DON'T apply

Several situations skip the ERC altogether:

After your fixed period ends. Once you're on SVR or your follow-on rate, no ERC applies.
Overpayments within the 10% allowance. Most fixed deals let you overpay up to 10% of the balance each year with no charge.
Porting your mortgage to a new property (transferring the same deal across). Most lenders allow this with no ERC, as long as you complete simultaneously or close to it.
Death of the borrower. ERCs usually don't apply if the mortgage is repaid because the borrower has died.
Switching internally with the same lender at the end of the fixed period.

The 'is it worth paying the ERC?' maths

Sometimes rates fall enough mid-fix that paying the ERC and remortgaging onto a much cheaper rate saves you money overall. The maths is simple:

Worked example: £200,000 mortgage, 3 years left on a 5% fix (paying around £1,170/month interest-only equivalent), Year 2 ERC of 4% = £8,000. New 5-year fix available at 3.5% (paying around £833/month). Monthly saving £337. Months to recoup £8,000 ERC: 24. Months remaining on current fix: 36. So you save 12 months × £337 = £4,044 by switching now, plus future savings on the new fix.

The maths flips the other way if rates have risen, the ERC is high, or you've only got a few months left on the fix. Always run the numbers (or have a broker run them) before paying an ERC.

Monthly saving from new rate × months remaining on current fix > ERC cost? Pay the ERC and switch.
Less than the ERC? Stay put and remortgage at the end of the fix.

Porting, the way to keep your deal when moving

If you're moving home mid-fix and want to keep the same deal (avoiding the ERC), most lenders offer porting, you transfer your existing mortgage to the new property. You may need to borrow more (top-up at the lender's current rates) but the core fix stays in place and the ERC doesn't apply.

Porting depends on the new property qualifying (it has to meet the lender's lending criteria), you passing reaffordability, and the completion dates aligning. Not every move can be ported, but for most straightforward moves it works.

ERCs are one of the most misunderstood parts of a UK mortgage. They're not a trap or a penalty for misbehaviour, they're a real cost the lender bears when you leave early. But the maths can absolutely justify paying one if rates have moved. Debbie at DS Financial runs the 'is it worth it?' calculation for clients regularly, comparing the ERC against the savings on a new rate. If your fix has 1-3 years left and rates have fallen, it's a calculation worth having someone do for you.

General information, not financial advice. Your home may be repossessed if you do not keep up repayments on your mortgage.

Sources: MoneyHelper, Early Repayment Charges, FCA, Mortgage rules, MoneyHelper, Mortgage overpayments.

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