What Are Early Repayment Charges?

What is an Early Repayment Charge and when do I need to pay this?

Early Repayment Charges (ERCs) apply if you come out of your mortgage deal before it is due to end whether that be to remortgage to another lender or to to pay off your mortgage completely. ERCs are charged as a percentage of the mortgage balance at the time of repaying it and can range from 1% to 5%. The charges will reduce each year as you get closer to your mortgage deal ending. Your mortgage offer will detail these percentages for you however to get an accurate figure, we advise to give your lender a call and they can confirm exactly how much you could be charged.

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Example

Lets say for example you have a mortgage balance of £100,000 on a 5 year fixed deal with an ERC of 5%. The amount you would be charged is £5,000 plus any exit fee they might add onto this. We also have a guide explaining exit fees to you!

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On your mortgage offer they may detail the Early Repayment Charges a bit like this:

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Date of repayment                        Basis of charge

1/10/2024-31/12/2026      5% of the outstanding balance of your loan

1/01/2027-31/12/2027      4% of the outstanding balance of your loan

1/01/2028-31/12/2028      3% of the outstanding balance of your loan

1/01/2029-31/12/2029      2% of the outstanding balance of your loan

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This shows the percentage you will be charged if you repay your mortgage within each year of your fixed deal. After the 31/12/2029, you will not pay an Early Repayment Charge. If you are looking at remortgaging to another lender, it is important to weight up the charges you may incur and the savings you may incur, as you may end up paying out more in charges to leave your deal early, compared to how much you will save on your monthly payments. Here at Just4Mortgages, we do that all for you and ensure you will be getting the most out of your deal...because we work for you! Not the lenders!