Introduction
Early repayment charges (ERCs) are fees lenders charge if you repay your mortgage early, either by switching deals or paying off the balance before the end of a fixed or discounted period.
But do all mortgages have them? The short answer is no – but many do.
This guide explains which mortgages include ERCs, how they work, how much they cost, and how to avoid paying more than necessary.
What Are Early Repayment Charges?
ERCs are penalties designed to protect lenders from financial loss if you exit your mortgage early.
They often apply to:
- Fixed-rate mortgages
- Tracker mortgages with tie-ins
- Discounted variable products
- Some buy-to-let mortgages
They do not apply to standard variable rate (SVR) mortgages or deals specifically designed without ERCs.
Why Do Lenders Charge ERCs?
When you take out a mortgage deal, the lender secures money at a particular rate.
If you leave early:
- The lender loses the expected interest
- They may incur costs reversing their funding arrangements
ERCs compensate the lender for this loss.
Do All Mortgages Have Early Repayment Charges?
No.
Here is where ERCs usually do and don’t apply.
Mortgages That Typically Have ERCs
- Fixed-rate deals (2, 3, 5, 7, 10 years)
- Tracker deals with initial discount periods
- Discounted variable deals
- Some high loan-to-value products
Mortgages That Usually Don’t Have ERCs
- Standard variable rate (SVR) mortgages
- Lifetime tracker deals without tie-ins
- Specialist “no-ERC remortgage” products
- Certain buy-to-let term-variable products
How Much Are ERCs?
ERCs are usually charged as a percentage of the outstanding mortgage balance, and the percentage reduces each year of your deal.
Typical Example for a 5-Year Fixed Deal
- Year 1: 5%
- Year 2: 4%
- Year 3: 3%
- Year 4: 2%
- Year 5: 1%
On a £250,000 mortgage, a 3% ERC = £7,500.
When Do ERCs Apply?
You pay ERCs if you:
- Remortgage before the end of your fixed period
- Switch to another lender
- Make a full repayment (e.g., selling your property)
- Reduce the loan beyond your annual overpayment limit
Overpayment Rules – Avoiding ERCs
Most lenders allow 10% per year in overpayments without charge.
This can significantly reduce long-term interest without triggering ERCs.
How to Avoid Early Repayment Charges
- Wait Until Your Fixed Term Ends
When your deal ends, you move to the SVR – where no ERCs apply.
- Choose a No-ERC Mortgage
Some tracker and variable products offer total repayment flexibility.
- Time Your Property Sale Carefully
Selling before your fixed period ends may trigger ERCs unless portable.
- Use Mortgage Portability
Many fixed deals are portable, allowing you to move the deal to a new home (subject to lender approval).
Are ERCs Ever Worth Paying?
Sometimes, yes.
Paying an ERC could make sense if:
- A new mortgage rate saves more money long-term
- You’re consolidating expensive debt
- You’re selling at a significant profit
- You’re restructuring a buy-to-let portfolio
A mortgage advisor can calculate whether the saving outweighs the charge.
Conclusion
Not all mortgages have early repayment charges, but many do – especially fixed-rate products.
Understanding when ERCs apply and how to avoid them can save thousands in unnecessary fees.
Always check the terms of your deal before switching or repaying early.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR PROPERTY. YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
Most Buy to Let Mortgages & Commercial are not regulated by the Financial Conduct Authority.
Bransgroves Mortgage Brokers is a trading name of Just Mortgages Direct Limited which is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.
Approved by The Openwork Partnership on 09/12/2025
