An early repayment charge is a fee a lender may charge if you repay your mortgage, or move it, before your deal ends. It is often the figure that decides whether moving now makes sense.
What an early repayment charge is
Many fixed and tracker deals carry an early repayment charge for the length of the deal. It is usually worked out as a percentage of the amount you repay, and on some deals the percentage steps down each year. Once your deal ends and you move onto the lender's standard variable rate, there is usually no charge to leave.
Where to find yours
Your mortgage offer sets out the charge and when it ends. Your annual statement or your lender's app often shows it too. For an exact figure on a given date, ask your lender for a redemption statement.
When it changes the answer
Paying the charge can still be worth it. Often it isn't. It comes down to a few things:
- How long is left on your deal. The fewer months left, the less a lower rate can save before the charge would have ended anyway.
- The gap between your rate and the rates available now. A small gap rarely covers a large charge.
- The costs of moving. Fees on the new deal add to what you would need to save.
- Whether you need to act now. If you want to borrow more, waiting until the charge ends may not suit you.
If your current rate is lower than anything available now, or the charge is larger than what moving would save, staying put can be the right answer.
Ways to work around it
- Arrange your next deal early. Many lenders let you secure a new deal some months before your current one ends, so it can start when the charge stops.
- Overpay within the allowance. Many deals let you overpay up to a set amount each year without a charge.
- Borrow without changing your mortgage. Your current lender may offer further borrowing. A homeowner loan sits alongside your mortgage instead, so there are no early repayment charges on your mortgage, because your mortgage does not change. It is a second loan secured on your home, with its own rate and a second monthly payment, so the total cost matters.
A broker from our panel can run the figures with you: the charge, the fees and the total cost of each option.
Questions people ask
Do I pay a charge if I stay with my lender?
Usually not, if the new deal starts after your current one ends. Moving to a new deal with the same lender before then can still carry a charge.
Do I pay a charge if I move home?
It depends on your deal. Some mortgages can be moved to a new property, which may avoid the charge, subject to the lender's checks.