How Do Early Repayment Charges Work?
ERCs are fees (typically 1-5%) for paying off your mortgage early during a fixed/discounted rate period. They reduce yearly and don't apply on SVR.
Early repayment charges compensate lenders for lost interest when you exit a deal early. They apply during fixed, discounted, or capped rate periods - not usually on tracker or SVR mortgages. ERCs are calculated as a percentage of the amount being repaid early - either the whole mortgage or the amount above your overpayment allowance. Most lenders allow 10% overpayment per year penalty-free. ERCs typically decrease annually - a 5-year fix might charge 5% in year 1, reducing to 1% by year 5. Once your deal ends and you move to SVR, ERCs no longer apply. When moving home, 'porting' your mortgage lets you avoid ERCs by transferring your deal to the new property.
Your home may be repossessed if you do not keep up repayments on your mortgage. Check your mortgage terms before making overpayments or remortgaging early.
Key Points
- 1Typically 1-5% of amount repaid early
- 2Usually reduce each year of the deal
- 310% annual overpayment usually allowed
- 4Don't apply on SVR or most trackers
- 5Porting avoids ERCs when moving
- 6Calculate if paying ERC saves money overall
Eligibility Criteria
- Check your mortgage offer document for ERC details
- ERCs apply during fixed/discounted rate period
- Overpayment allowance is usually 10% per year
- ERCs calculated on calendar or mortgage year
- Some mortgages have ERC-free options (higher rates)
Typical Timeframe
ERCs apply for the duration of your fixed or discounted rate period - typically 2, 3, 5, 7, or 10 years. After your deal ends and you move to SVR, ERCs no longer apply and you can remortgage or repay freely.
Next Steps
- 1Check your mortgage documents for ERC terms
- 2Calculate your overpayment allowance
- 3Compare ERC cost vs potential savings
- 4Speak to a broker about your options
- 5Consider timing remortgage around ERC end
Why This Matters for Your Mortgage
Understanding these details helps you make informed decisions during the mortgage process. Every element of your application—from deposits to documentation—affects your approval chances and the rates you can access.
Lenders assess applications holistically, weighing multiple factors together. Knowing what they look for allows you to present the strongest possible application. This is particularly important for non-standard situations where lender criteria varies significantly.
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Related Questions
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Content reviewed: January 2026
CeMAP awarded by The London Institute of Banking & Finance. Cert CII (MP) awarded by the Chartered Insurance Institute.