Mortgage Early Repayment Charges: Is It Worth Paying to Remortgage?

A mortgage early repayment charge (ERC) is a fee that may apply if you repay, switch or overpay your mortgage during a period specified in your mortgage agreement. It can be thousands of pounds, so a lower new mortgage rate does not automatically mean switching early will save you money.

The practical question is not simply whether a new mortgage has a lower monthly payment. It is whether switching now, including the ERC and all other costs, leaves you better off than waiting, when both options are compared over the same period.

This guide covers how ERCs are calculated, when they apply, whether they can be avoided and what to check before remortgaging. For the full switching process, see our remortgage guide and remortgage timing guide.

What is a mortgage early repayment charge?

An ERC is a contractual charge that may be payable when you repay some or all of your mortgage during a specified period. It commonly applies to fixed-rate and some tracker or discounted-rate deals, but not every mortgage has one.

An ERC is different from a mortgage exit or account-closure fee. The latter may apply when an account is closed, depending on the agreement, even when the ERC period has ended. Your mortgage offer and lender’s redemption statement should identify each charge separately.

The Financial Conduct Authority (FCA) requires ERCs on regulated mortgage contracts to be capable of expression as a cash amount and to represent a reasonable pre-estimate of the lender’s early-termination costs. See FCA MCOB 12.3.

How much is an early repayment charge?

The amount depends on your specific mortgage terms, the chargeable balance, the date you repay and the lender’s calculation method. Some deals use a percentage that reduces over time. Others may have different charging structures.

Illustrative ERC calculation:

Outstanding mortgage balance	Illustrative ERC percentage	Illustrative charge
£100,000	1%	£1,000
£200,000	2%	£4,000
£250,000	3%	£7,500
£300,000	5%	£15,000

For a straightforward percentage-based example, £250,000 × 3% = £7,500. These percentages are illustrations, not current lender quotations or universal fee bands. Some lenders calculate the charge on a different defined balance or using different terms. Ask for the actual amount for your intended redemption date.

Do early repayment charges decrease each year?

Some products use a stepped schedule, such as an illustrative 5%, 4%, 3%, 2% and 1% over successive years. Other products do not follow this pattern. The percentage can also change on an anniversary or a specific date rather than simply at the start of a calendar year.

Never assume your ERC falls on the date you expect. Check the precise date and whether a reduction applies before instructing your solicitor to redeem the mortgage.

When do you pay an early repayment charge?

An ERC may apply when you:

• Remortgage to a new lender and redeem your existing mortgage during the chargeable period.
• Sell your property and repay the mortgage early, unless a permitted port or other arrangement avoids or refunds the charge.
• Make a lump-sum overpayment beyond the allowance or threshold in your mortgage terms.
• Change products or borrow differently where your lender’s terms say a charge applies.

Simply researching deals or obtaining a mortgage offer does not normally redeem your existing mortgage. The relevant event is usually repayment or completion, subject to your mortgage terms. This is why securing a new rate in advance and scheduling completion after your ERC period ends can be valuable.

How do I find my ERC and the date it ends?

Start with your original mortgage offer, any later product-switch documents and the lender’s online account. Check:

1. The date the current mortgage deal and ERC period end. They are not necessarily the same.
2. The exact ERC calculation or percentage for your proposed repayment date.
3. Whether an overpayment allowance is available and how it is measured.
4. Whether the mortgage can be ported and what conditions apply.
5. Any separate exit, administration or redemption fees.

Ask your existing lender for a redemption statement or written ERC quote for the intended completion date. The FCA’s early repayment disclosure rules require relevant information about the implications of early repayment to be provided to consumers with applicable regulated mortgages.

Is it worth paying an ERC to remortgage early?

Sometimes, but a lower monthly payment is not proof of a saving. An accurate comparison needs to include the interest paid, all fees and the remaining mortgage balance at the end of the same comparison period.

Compare	Switch early	Wait until ERC ends
ERC	Pay the charge if applicable	Usually avoid the charge if redemption is after the ERC period
Mortgage rate	New rate from early completion	Existing rate until the planned switch
Other costs	New lender product, legal and valuation costs where applicable	Costs of the later deal, if applicable
Broker fee	Include any applicable fee	Include any applicable fee
Mortgage balance	Calculate balance at comparison end	Calculate balance at the same date
Rate uncertainty	Rate may be secured now	Available rates may differ later

The fairest calculation compares total mortgage payments + fees + the outstanding balance at the same future date, adjusted for any cashback or other incentives. If the mortgage terms differ, a simple comparison of monthly payments can be particularly misleading.

Worked example: switch now or wait 12 months?

Illustration only. Assume a £200,000 capital repayment mortgage with 20 years remaining. There are 12 months left on the current fixed rate. Repaying now triggers a 2% ERC of £4,000, and the new mortgage has a £999 product fee paid separately. Both options retain the same repayment term and are compared over exactly 12 months.

After 12 months	Wait (current rate 5.50%)	Switch now (new rate 4.50%)
Monthly repayment	£1,375.77	£1,265.30
Total repayments	£16,509.30	£15,183.59
ERC and product fee	£0	£4,999
Balance remaining	£194,349.68	£193,687.27
Repayments, fees and balance combined	£210,858.98	£213,869.86

The result: switching now costs approximately £3,011 more over these 12 months, despite the new rate being one percentage point lower. Even if the current rate were 6.50% instead, switching at 4.50% with the same charges would still cost approximately £1,018 more over the period.

The figures use standard monthly capital-and-interest repayments, with the same £200,000 opening balance and 240-month term. Payments are calculated at full precision before display rounding. The new product fee and ERC are assumed paid from cash, not added to the loan. The illustration excludes other legal, valuation or broker costs, incentives, tax effects and any rate changes. These are hypothetical rates, not live mortgage offers.

With 12 months or less remaining, paying an ERC often does not recover its cost through lower interest alone, but it is not a universal rule. The decision can change with a larger rate gap, smaller charge, different remaining period or the terms of the available products. Compare your actual quotes and the balance at the same future date.

Can you remortgage before your fixed rate ends without paying an ERC?

Often you can apply in advance and complete after the ERC period ends, provided the new mortgage offer and lender’s conditions allow it. Application, offer and completion are separate stages.

For example, if your ERC ends on 30 April, a suitable new mortgage could potentially be arranged beforehand with completion scheduled after that date. Confirm the precise end date with your lender and allow time for legal work. Never assume a one-day difference is immaterial.

Some lenders also offer a product transfer in advance of the existing deal ending. The timing and any early-switch rules vary by lender. Our remortgage timing guide covers the practical options, and our product transfer comparison explains the differences.

Can you avoid an ERC with a product transfer?

Not automatically. A product transfer means moving to another mortgage product with your existing lender. Many lenders permit customers to arrange a new deal near the end of their existing one without an ERC, but the permitted window and any charge for switching earlier depend on the lender and the current product.

Check the exact switch date, available rates, product fees and whether the lender will require an affordability assessment. A product transfer may avoid new-lender legal and valuation work, but that does not necessarily make it cheaper overall.

Can you overpay your mortgage without an ERC?

Some mortgages allow penalty-free overpayments within a stated allowance, often described as a percentage of the balance. There is no universal 10% entitlement. The allowance, period used to measure it, whether unused allowances carry forward and any restrictions vary by lender and product.

Before making a lump-sum payment, ask your lender for the amount you can overpay without an ERC on that date. An overpayment can reduce future interest and potentially improve your loan-to-value, but it also uses cash that may be needed elsewhere. See our mortgage overpayment calculator.

Can you port your mortgage to avoid an ERC when moving house?

Porting means asking your existing lender to transfer your current mortgage product to borrowing secured on a new property. It is subject to the lender’s criteria, affordability, property assessment and timing conditions. Portability is not a guarantee that you can move without paying an ERC.

A lender may require the old mortgage to be repaid on sale and then refund some or all of an ERC if the new mortgage completes within its permitted period. Additional borrowing may be on a different rate, and reducing the loan may trigger a charge on the amount not ported. Ask the lender for written terms before relying on a refund.

If you’re moving, see our home mover guidance.

Can an ERC be waived or challenged?

ERCs are usually contractual, so lenders do not have to waive them simply because rates have changed or you have found a cheaper mortgage. Some lenders may have specific exceptions or discretionary policies. Do not assume any exception applies.

If you think the charge has been calculated incorrectly or was not properly disclosed, ask the lender for a written breakdown and use its complaints process. If you remain dissatisfied after its final response, or the applicable complaint timeframe has passed, you may be able to refer the matter to the Financial Ombudsman Service. This does not mean an ERC is automatically unfair.

What if your circumstances have changed?

If your income has fallen, you are self-employed or you have experienced adverse credit, moving to a new lender may be harder than changing product with your existing lender. Eligibility, underwriting and affordability requirements vary.

An existing-lender switch can sometimes be available with fewer checks where there is no additional borrowing, but not every product transfer is automatically approved. Compare the available options and avoid paying an ERC without confirming the new mortgage is achievable. See our guides to self-employed remortgages and remortgaging with bad credit.

If you are considering releasing equity or consolidating debts, remember that extending the term can increase total interest, and securing previously unsecured debt against your home introduces additional risk. See our debt consolidation guide.

What fees should you include alongside the ERC?

The ERC is only one potential cost. Depending on the route, include a lender product fee, valuation, conveyancing, mortgage exit fee and any broker fee. A product described as fee-free generally refers to the lender’s product fee or particular incentives, not necessarily every cost of arranging the mortgage.

Option Finance’s broker fee is £499 in total: £299 on application and £200 when a mortgage offer is issued. The £299 is fully refundable if the mortgage application is declined. It is not refundable if you voluntarily withdraw after the application has been submitted. We explain and confirm these terms in writing before you proceed. Your initial consultation is free.

For a full breakdown, see our remortgage costs and fees guide.

What should you do before deciding to pay an ERC?

1. Confirm the charge with your existing lender for the proposed redemption date.
2. Check whether you can reserve a deal now and complete after the charge ends.
3. Compare your existing lender’s product-transfer options with suitable new-lender deals.
4. Model both routes over the same period, including total payments, fees, incentives and the remaining balance.
5. Confirm the new mortgage is affordable and available before committing to repay the existing mortgage.

There is no guaranteed saving from switching early. Rates can move up or down, and the best decision depends on your mortgage and circumstances.

Frequently asked questions

Speak to Option Finance about your ERC

If you know your mortgage balance, current rate, ERC end date and approximate charge, we can help compare switching now with waiting and explain the costs of each route.

Book a free initial consultation using the enquiry form below. We will explain any applicable broker fee before you proceed.