What Are Early Repayment Charges?

Early repayment charges (ERCs) are fees lenders charge when you pay off your mortgage early or overpay more than allowed during a fixed or discounted rate period. ERCs typically range from 1-5% of the amount repaid, often reducing each year. For example, a 5-year fix might have 5% ERC in year 1, 4% in year 2, down to 1% in year 5. On a £200,000 mortgage, a 3% ERC equals £6,000. You can usually overpay 10% per year without triggering ERCs.

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What is an early repayment charge (ERC)?

An early repayment charge is a fee lenders charge if you pay off your mortgage early or overpay more than allowed during a fixed or discounted rate period. ERCs compensate the lender for lost interest. They're typically 1-5% of the amount repaid early.

How much are early repayment charges?

ERCs typically range from 1% to 5% of the amount being repaid. They often reduce each year - e.g., 5% in year 1, 4% in year 2, down to 1% in year 5. On a £200,000 mortgage, a 3% ERC would be £6,000.

Can I avoid early repayment charges?

You can avoid ERCs by: waiting until your deal ends (most have no ERC on SVR), using your overpayment allowance (usually 10% per year), porting your mortgage when moving, or choosing a mortgage with no ERCs (usually higher rates).

Do all mortgages have early repayment charges?

Most fixed and discounted rate mortgages have ERCs during the deal period. Tracker mortgages often have lower or no ERCs. Once you're on the lender's SVR (standard variable rate), there are usually no ERCs.

Is it worth paying the ERC to remortgage?

Sometimes yes. Calculate: ERC cost vs interest saved with new rate over remaining term. If current rate is much higher than available rates, paying ERC might save money overall. A broker can run the numbers for you.

Are ERCs charged on overpayments?

Only if you exceed your allowance. Most mortgages allow 10% overpayment per year without charge. Exceeding this triggers ERC on the excess amount only. Check your mortgage terms for your specific allowance.

Quick Answer

How Do Early Repayment Charges Work?

Last reviewed: December 2025

Reviewed by Jay Sabine – CeMAP Qualified – 29 years experience

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

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Year of Deal	Typical ERC %	Cost on £200k	Cost on £300k
Year 1	5%	£10,000	£15,000
Year 2	4%	£8,000	£12,000
Year 3	3%	£6,000	£9,000
Year 4	2%	£4,000	£6,000
Year 5	1%	£2,000	£3,000
After deal ends (SVR)	0%	£0	£0

How Do Early Repayment Charges Work?

Key Points

Eligibility Criteria

Typical Timeframe

Next Steps

Related Questions

Typical ERC Structure

How to Avoid or Minimise ERCs

Wait Until Deal Ends

Use Overpayment Allowance

Port When Moving

Calculate If Worth Paying

When Paying ERCs Makes Sense

Example Calculation

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