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    If you don’t want to be stuck with your current mortgage deal for the long term, you can remortgage to a new deal or pay off your mortgage early.

    But before you do hit the exit button on your mortgage, be warned. Your mortgage lender might hit you with an early repayment charge and this could cancel out the savings you make by remortgaging or overpaying on your existing deal.

    What is this early repayment charge? And is there a way to avoid paying it? Keep reading this guide to find out more.

    What is a mortgage early repayment charge?

    An early repayment charge (ERC) is the penalty imposed by lenders on borrowers who want to change their mortgage deal or pay off their mortgage early before the end of a certain period.

    Early repayment charges can seem unfair but lenders impose these to compensate for any losses they may incur and to dissuade borrowers from applying for new mortgages every time they come across a better deal.

    When does an early repayment charge apply?

    Early repayment charges apply during the tie-in period of your mortgage.

    This tie-in period could be the length of time that your fixed rate deal lasts or it might extend beyond the deal period. So if you were on a 2-year fixed rate deal, for example, you might still incur the early repayment charge if you try to switch deals within 3 years. As you would be on the lender’s standard variable rate after your fixed-rate period ends, switching can still be a good idea if moving to a new deal will help you save money.

    Early repayment charges don’t only apply to fixed-rate mortgages as they can be imposed on borrowers with certain types of variable-rate mortgages too.

    You may be subjected to the early repayment fee if you:

    • Pay off your mortgage with a lump sum before your mortgage deal ends
    • Switch to a better mortgage deal before your current mortgage deal ends
    • Pay off more than a set amount each month
    • Switch your mortgage to a new mortgage product while you’re in the special-rate period
    • Move home but are unable to port your mortgage loan to your new property
    • Want to transfer your mortgage to a property that is worth less than your current home
    We help you remortgage at the most cost-effective time

    Mortgage Lender early repayment charges

    The amount of the early repayment charge and the conditions under which it is applied can vary from lender to lender. Some lenders may charge a flat fee for early repayment, while others may charge a percentage of the remaining mortgage balance. The specific terms of an early repayment charge, including the amount and any conditions, will be outlined in the mortgage agreement between the borrower and the lender. It is important for borrowers to understand the terms of their mortgage agreement and any potential early repayment charges before deciding to pay their mortgage off early.

    How much is an early repayment charge?

    Early repayment charges are usually calculated as a percentage of the outstanding balance on the mortgage, typically between 1% and 5%.

    1% might not seem like a huge penalty but if your outstanding mortgage balance was £200,000, the fee you charged would be £2,000. This is less than the £10,000 you would be charged if the ERC was calculated at 5% but it’s still a sizeable figure.

    Some lenders will reduce the early repayment charges percentage towards the end of the mortgage deal. A 5% charge may be applied in year 1 of your deal, for example, and it may decrease to 4% in year 2, 3 % in year 3, and so on. As such, it might be wise to withhold remortgaging to a new mortgage deal until you are within the final stage of your current deal as the cost of the fee will be lower.

    Below you will find the ERCs for 12 top UK mortgage lenders.

    Rate Type Deal Period – (NatWest Early Repayment Charges)
    2 year fixed 5 year fixed 2 Year Tracker
    Year 1 1.5% 4.5% 0.5%
    Year 2 0.75% 4.25% 0.25%
    Year 3 4%
    Year 4 2.5%
    Year 5 1%

    This information is correct and true as of the 5th of December 2022. These charges are applicable on new mortgages with the lender and could be different for existing/historical mortgages. 

    Fixed Rate Deal Period – (Santander Early Repayment Charges)
    2 year fixed 2.5 year fixed 5 year fixed
    Year 1 2% 2% 5%
    Year 2 1% 1% 5%
    Year 3 3%
    Year 4 3%
    Year 5 1%

    This information is correct and true as of the 5th of December 2022. These charges are applicable on new mortgages with the lender and could be different for existing/historical mortgages. 

    Fixed Rate Deal Period – (Halifax Early Repayment Charges)
    2 years 5 years 10 years
    Year 1 2% 5% 6%
    Year 2 1% 4% 6%
    Year 3 3% 6%
    Year 4 2% 6%
    Year 5 1% 6%
    Year 6 5%
    Year 7 4%
    Year 8 3%
    Year 9 2%
    Year 10 1%

    This information is correct and true as of the 5th of December 2022. These charges are applicable on new mortgages with the lender and could be different for existing/historical mortgages. 

    Fixed Rate Deal Period – (HSBC Early Repayment Charges)
    2 year fixed 5 year fixed
    Year 1 2% 5%
    Year 2 1% 4%
    Year 3 3%
    Year 4 2%
    Year 5 1%

    This information is correct and true as of the 5th of December 2022. These charges are applicable on new mortgages with the lender and could be different for existing/historical mortgages. 

    Fixed Rate Deal Period – (Accord Early Repayment Charges)
    2 years 3 years 5 years
    Year 1 2.5% 3% 5%
    Year 2 1.5% 2.5% 4%
    Year 3 1.5% 3%
    Year 4 2.5%
    Year 5 1.5%

    This information is correct and true as of the 5th of December 2022. These charges are applicable on new mortgages with the lender and could be different for existing/historical mortgages. 

    Fixed Rate Deal Periods Barclays Early Repayment Charges
    2 year fixed 1% of balance repaid
    5 year fixed 2% of balance repaid
    7 year fixed 3% of balance repaid
    10 year fixed 10% of balance repaid
    Tracker rate products No ERC’s.

    Barclays ERCs remain the same as above across their whole product range – First time buyers, home movers, remortgage, buy to let ETC

    This information is correct and true as of the 5th of December 2022. These charges are applicable on new mortgages with the lender and could be different for existing/historical mortgages. 

    Fixed Rate Deal Period – (TSB Early Repayment Charges)
    2 year fixed 5 year fixed 10 year fixed
    Year 1 2% 5% 6%
    Year 2 1% 4% 6%
    Year 3 3% 6%
    Year 4 2% 6%
    Year 5 1% 6%
    Year 6 5%
    Year 7 4%
    Year 8 3%
    Year 9 2%
    Year 10 1%

    The TSB ERCs criteria above apply for their First time buyer and home mover products and remortgages.

    Residential – No ERC’s on 2 year tracker products

    This information is correct and true as of the 5th of December 2022. These charges are applicable on new mortgages with the lender and could be different for existing/historical mortgages. 

    During the Platform early repayment charge period, overpayments can be made up to 10% of the outstanding mortgage balance on last anniversary or account open date without incurring an early repayment charge. Overpayment payments that exceed 10% of the outstanding mortgage balance on anniversary or account open date within any contractual year will incur an early repayment charge. Cashback is repayable if the loan is redeemed during the initial product period.

    2 year tracker

    • 2% in year 1
    • 1% in year 2

    2 year fixed

    • 2% of the amount redeemed until 30 Apr 2024
    • 1% of the amount redeemed until 30 Apr 2025

    3 year fixed

    • 3% of the amount redeemed until 30 Apr 2024
    • 2% of the amount redeemed until 30 Apr 2025
    • 1% of the amount redeemed until 30 Apr 2026

    5 year fixed

    • 5% of the amount redeemed until 30 Apr 2024 
    • 4% of the amount redeemed until 30 Apr 2025
    • 3% of the amount redeemed until 30 Apr 2026
    • 2% of the amount redeemed until 30 Apr 2027
    • 1% of the amount redeemed until 30 Apr 2028

    10  year fixed

    • 5% of the amount redeemed until 30 Apr 2029
    • 4% of the amount redeemed until 30 Apr 2030
    • 3% of the amount redeemed until 30 Apr 2031
    • 2% of the amount redeemed until 30 Apr 2032
    • 1% of the amount redeemed until 30 Apr 2033

    This information is correct and true as of the 5th of December 2022. These charges are applicable on new mortgages with the lender and could be different for existing/historical mortgages. 

    Fixed Rate Deal Period – (Virgin Money Early Repayment Charges)
    2 year tracker 2 year fixed 5 year fixed 10 year fixed
    Year 1 1% 1.5% 3.5% 8%
    Year 2 1% 1.5% 3.5% 8%
    Year 3 3.5% 7%
    Year 4 3.5% 7%
    Year 5 3.5% 6%
    Year 6 5%
    Year 7 4%
    Year 8 3%
    Year 9 2%
    Year 10 1%

    Virgin Money’s ERC rates apply across their whole mortgage product range.

    This information is correct and true as of the 5th of December 2022. These charges are applicable on new mortgages with the lender and could be different for existing/historical mortgages. 

    The Mortgage Works Early Repayment Charges (ERCs).

    ERCs Until Product type
    Lifetime Variable 2 Year Tracker 2 Year Fixed 3 Year Fixed 5 Year Fixed 10 Year Fixed
    30/11/22 0.75% 0.75% 1.50% 2.50% 4.25% 7%
    31/05/23 0.75% 1.50% 2.50% 4.25% 7%
    31/05/24 0.50% 1% 2% 4% 7%
    31/05/25 1% 3% 7%
    31/05/26 2% 7%
    31/05/27 1% 6%
    31/05/28 5%
    31/05/29 4%
    31/05/30 3%
    31/05/31 2%
    31/05/32 1%

    This information is correct and true as of the 5th of December 2022. These charges are applicable on new mortgages with the lender and could be different for existing/historical mortgages. 

    Fixed Rate Deal Period – (Coventry Early Repayment Charges)
    2 year fixed 3 year fixed 5 year fixed
    Year 1 2% 2.5% 5%
    Year 2 1% 2.5% 5%
    Year 3 1% 3%
    Year 4 3%
    Year 5 1%

    The above Coventry ERC rates apply across their residential and Buy to let mortgage product range.

    There is no ERC for Tracker products

    This information is correct and true as of the 5th of December 2022. These charges are applicable on new mortgages with the lender and could be different for existing/historical mortgages. 

    Fixed Rate Deal Period – Bank of Ireland Early Repayment Charges)
    2 year fixed 5 year fixed
    Year 1 3% 4%
    Year 2 2% 4%
    Year 3 3%
    Year 4 3%
    Year 5 2%

    The above Bank of Ireland ERC rates apply across their residential and Buy to let mortgage product range.

    This information is correct and true as of the 5th of December 2022. These charges are applicable on new mortgages with the lender and could be different for existing/historical mortgages. 

    We help you remortgage at the most cost-effective time

    How to get a mortgage with no early repayment charge

    Certain mortgages, such as tracker and standard variable rate mortgage deals, don’t come with an early repayment charge but they often cost more due to the higher interest rate on these loans.

    Such mortgages can still be recommended if you’re interested in repaying early or if you want the flexibility of switching to a new lender. But if you want to start out with a mortgage at a lower interest rate and with reduced monthly repayments, another mortgage type could be better for you.

    For a discussion about which type of mortgage might be best for your situation, get in touch with our team and we will talk about your options with you.

    How to avoid early repayment charges

    Wondering when to remortgage to avoid an early repayment charge? The best way to avoid paying the early repayment charge is to check your mortgage agreement to find out the date when early mortgage fees will no longer be applied. If you stick to this deadline, you will be free to switch to a different lender or pay off your mortgage without penalty.

    There are other ways to avoid paying the early repayment charge as you can see below.

    • Don’t go over the agreed limit when making overpayments on your mortgage
    • Choose a deal with no early repayment charge, such as a tracker rate mortgage or a standard variable rate deal (you will likely have to pay more interest if you choose these loans)
    • Port your mortgage when you move instead of switching to a new mortgage product (some mortgage lenders will still charge you the ERC when you transfer your mortgage, so you should check in with them before porting)
    • Add the repayment charge to your new agreement if you switch to a new mortgage (this will help you in the short term but as interest will be placed on the charged amount, you will have more to pay in the long term)

    When is it worth paying an early repayment charge?

    Paying the early repayment charge is worth it if you won’t be in financial difficulty after paying off your mortgage or if you can make significant savings by switching to a cheaper deal.

    But if the early repayment charge will damage your finances or if it won’t cancel out the savings you make with cheaper interest rates on a mortgage with another lender, then it might be worth sticking to the deadline on your existing mortgage agreement before overpaying or switching to a loan with a better interest rate.

    Get the best mortgage for you with help from YesCanDo

    To learn more about how early repayment charges work and to get advice on the types of mortgage deals that are right for you, get in touch with our team. We will support you throughout your mortgage journey and will help you reduce the cost of your loan by helping you get a deal with reduced fees and lower interest rates.

    We will also complete your mortgage application on your behalf, ensuring that it meets your chosen lender’s criteria to improve your chances of mortgage approval.

    Contact us today by phone at 03300884407, or arrange an appointment via WhatsApp or by filling out our callback form, and benefit from the advice and support that our experienced mortgage advisers can give to you.

    We help you remortgage at the most cost-effective time

    FAQs

    You can contact your lender directly to ask them about your early repayment charge. Your Mortgage Illustration, offer letter, and mortgage statement will also give you details about the charge and the set period in which it will be applicable if you exit your mortgage early.

    The decision to pay off a mortgage early and the associated early repayment charge is a personal one that depends on an individual’s financial situation and goals. Some factors to consider when deciding whether to your mortgage off early and fix it include the current interest rate environment, the remaining balance on the mortgage, and any potential savings from paying off the mortgage early. It may also be beneficial to consult with a financial advisor or mortgage lender to discuss the potential advantages and disadvantages of paying off a mortgage loan early and fixing it with a new rate.

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    Jane Rowe (CII)
    Jane Rowe (CII)

    Jane (CII) is an outstanding Mortgage & Protection Adviser at YesCanDo Money. Boasting decades of industry expertise and an overwhelming passion for client care, she excels at guiding her clients whether they're making their first steps onto the property ladder, moving homes or exploring buy-to-let opportunities. Jane stands out as a true professional by finding the best solutions and prioritising client financial security first and foremost.

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