How it works

An early repayment charge (ERC) is what your lender charges if you repay or remortgage before your fixed, tracker or discount deal ends. It is a percentage of your outstanding balance — not of the amount you repay.

1. The charge is a % of your balance

Multiply your outstanding balance by the ERC rate. For example, 3% of a £200,000 balance is £6,000.

2. The rate often steps down each year

A common pattern on a 5-year fix is 5% in year one, then 4%, 3%, 2% and 1% in the final year. Some lenders instead charge one flat rate for the whole tie-in.

3. You usually have a penalty-free allowance

Most lenders let you overpay about 10% of the balance each year with no ERC (some allow 20%). The charge only bites on the amount above that, or on a full redemption during the deal.

4. Your exact figures are in your paperwork

Your real rate, tie-in end date and allowance are set by your lender and stated in your ESIS or mortgage offer. Ask for a redemption statement for the precise figure to a date.

This is a free, independent educational tool. The figures are illustrative estimates based on typical UK early repayment charges — your actual rate, tie-in period and overpayment allowance are set by your lender and stated in your ESIS or mortgage offer. This is not financial advice. Always check your own paperwork or speak to your lender or a regulated mortgage adviser before acting.

Sources: MoneyHelper — mortgages (early repayment) · HomeOwners Alliance — Early repayment charges · Moneyfacts — ERCs explained