Learn what early repayment charges are, when they apply during a remortgage, and practical ways to reduce or avoid them—so you can plan your switch with fewer surprises.
How to avoid mortgage early repayment charges (ERCs) when remortgaging
What are early repayment charges (ERCs)?
An early repayment charge (ERC) is a fee your mortgage lender may apply if you repay your mortgage earlier than the deal’s agreed term. For many borrowers, this matters most when you remortgage, switch lenders, or move home during a fixed or discounted period.
In practice, ERCs are designed to compensate the lender if the mortgage is ended sooner than expected. That means the charge can be triggered even if you’re not “paying off” the mortgage in the usual sense—switching to a new deal with a different lender can still be treated as an early redemption.
When ERCs typically apply
ERCs are most commonly linked to:
- Remortgaging during a fixed/discounted period
- Selling the property and redeeming the mortgage
- Paying more than the permitted amount (some deals allow limited overpayments without a charge)
ERCs usually only apply for a defined time window—often the length of the fixed/discounted period—then they fall away once the deal ends.
How much are early repayment charges?
ERCs vary by lender and product, but they are commonly calculated as either:
- A percentage of the outstanding mortgage balance, or
- A fixed monetary amount
A simple way to think about the cost
Because ERCs are often based on a percentage of the remaining balance, the charge can be significant on larger loans—even if the percentage looks small.
It’s also common for ERCs to reduce over time. For example, a deal might charge a higher percentage in the first year and a lower percentage later in the fixed term.
Why the exact calculation matters
Two borrowers can have the same mortgage balance but face different ERC outcomes because of factors such as:
- the remaining term of the fixed/discounted period
- whether the ERC is percentage-based or fixed
- how much of the mortgage is being repaid (full redemption vs partial)
- whether the lender applies any tapering (reducing ERC) as time passes
Can you remortgage without paying an ERC?
In many cases, the only reliable way to avoid an ERC is to remortgage after your current deal ends—when the ERC period has finished.
However, whether you can avoid the charge depends on the type of mortgage you currently have and what you’re doing with it.
Because ERC rules differ between lenders and products, it’s important to check your mortgage offer or current mortgage statement details for the ERC terms that apply to your specific deal.
Ways to reduce or avoid ERCs when remortgaging or moving home
1) Time your remortgage to when the ERC window ends
If your mortgage is fixed or discounted, planning the switch so it happens after the ERC period ends is often the cleanest approach.
Even then, it’s worth noting that remortgaging involves process time (application, valuation, legal work). Building in enough lead time can help you avoid accidentally completing the switch while the charge is still active.
2) Consider whether porting could be an option
Some borrowers can port their mortgage—meaning they may be able to transfer the existing mortgage to a new property rather than redeeming it and starting again.
Porting rules vary by lender and product. Where it’s available, it may reduce the likelihood of triggering an ERC because the mortgage isn’t being fully redeemed.
3) Check whether overpayments are “ERC-free” up to a limit
Many mortgages allow borrowers to make limited overpayments each year without an ERC, often under a specific percentage allowance.
If you’re considering remortgaging, this can be relevant in two ways:
- you may be able to reduce your balance within the ERC rules
- you may be able to improve your loan-to-value (LTV) position, potentially helping you access better deals later
But overpayment allowances and ERC treatment differ widely, so it’s important to confirm the exact terms for your mortgage.
4) Compare the ERC cost against the savings from switching
A remortgage may still be worthwhile even if an ERC applies—particularly if the interest rate difference is large enough.
The key is to compare the total cost of switching, not just the ERC. That includes lender and legal fees as well as any valuation or arrangement costs.
5) Be cautious with partial redemptions
Some deals charge ERCs only when you redeem the mortgage in full, while others can apply when you repay more than an allowed amount.
If you’re thinking about making a lump sum repayment or reducing the balance before remortgaging, understanding how the ERC applies to partial repayments can prevent unexpected charges.
Why lenders charge ERCs
ERCs exist because fixed and discounted deals are priced based on expectations about how long the mortgage will run.
When a borrower repays early—especially by switching lenders—the lender may lose out on the interest it expected to receive over the deal period. The ERC is intended to help compensate for that loss.
Understanding this can help you plan: if you’re likely to move, change jobs, or want flexibility, the ERC structure becomes a practical part of choosing the right mortgage deal.
Additional fees to consider when remortgaging
Even if you manage to reduce or avoid an ERC, remortgaging can still involve other costs. Common examples include:
- Deeds release fees (where applicable)
- Booking/arrangement fees
- Valuation fees
- Legal and conveyancing costs
When comparing options, it’s important to consider the full picture: ERCs plus all switching costs, weighed against the potential interest savings.
Remortgaging decisions: what else can affect the outcome?
Loan-to-value (LTV) can change over time
As you repay your mortgage balance, your LTV typically reduces. A lower LTV can sometimes improve the range of available deals and pricing.
Property value changes can also affect LTV, which means the “best time” to remortgage may not be only about ERC timing—it can also be about when your LTV position becomes more favourable.
Your circumstances may change
ERCs can become relevant if you need to sell sooner than planned. If you’re unsure about how stable your situation will be over the next few years, it can be worth considering mortgage options with lower ERC risk.
Key takeaways
- ERCs are triggered when you repay early during the deal’s ERC period, often including remortgaging to a new lender.
- The most dependable way to avoid ERCs is to remortgage after the fixed/discounted period ends.
- Porting and ERC-free overpayment allowances may reduce the impact in some scenarios, but terms vary.
- Always compare total switching costs, not just the ERC.
Related considerations in the remortgage guides
If you’re planning a remortgage, it can also help to review related topics such as:
- how overpayments can affect your mortgage balance
- how LTV changes over time
- the costs involved in switching lenders
Get in touch
We are your online mortgage broker, offering you the convenience of applying for a mortgage online. However, we understand that sometimes you may prefer to speak with a human - phone, email or in person.
- Phone number
- 01133 205 902
- [email protected]
- Postal address
-
31 Bradford Chamber Business Park,
New Lane, Bradford, BD4 8BX
Looking for a career in Mortgage Advice? View job openings.
We are authorised and regulated by the Financial Conduct Authority (No. 919921). The FCA does not regulate most Buy to Let mortgages.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
Cyborg Finance Limited is registered in England and Wales (No. 12131863) at Bradford Chamber, New Lane, Bradford, BD4 8BX