Calculate the early repayment charge (ERC) on your mortgage. Find whether it is worth paying the penalty to remortgage now or wait until the fixed period ends.
An Early Repayment Charge is a fee charged by your mortgage lender if you pay off your mortgage (in full or above the overpayment limit) during a fixed or discounted rate period. ERCs are typically calculated as a percentage of the outstanding balance — common rates are 1-5%, reducing year by year during the fixed period. For example, a 3% ERC on a £250,000 mortgage = £7,500.
ERCs apply when you: remortgage to a new lender during the fixed/discounted period; pay off the mortgage entirely (e.g., on sale of the property); make overpayments above the annual limit (usually 10% per year). ERCs do not apply when you simply move to your existing lender's standard variable rate after the fixed period ends. Check your mortgage deed for exact terms.
Compare: (1) the ERC cost against (2) the total interest savings from moving to a lower rate over the remaining fixed period. If the new rate is significantly lower and there are many months left, the savings often outweigh the ERC. Our calculator does this comparison automatically. Also factor in any remortgage fees (product fee, legal costs, valuation) on the new deal.
Yes — most lenders allow overpayments of up to 10% of the outstanding balance per year without penalty. You can use this to reduce the balance before the ERC period ends. Some lenders offer ERC-free products (tracker or standard variable rate mortgages) that allow unlimited overpayment at any time. Always read your mortgage conditions carefully.
If you sell and pay off the mortgage during the fixed period, the ERC applies to the outstanding balance at the time of completion. However, if your mortgage is 'portable' (transferable to a new property), you may be able to avoid the ERC by taking the existing mortgage with you to the new property. Not all mortgages are portable — check your mortgage terms.