Early repayment charges (ERCs) and the cost of remortgaging

When you remortgage, you may be ending your current mortgage deal early (for example, if you’re switching before a fixed or discounted period ends). If you leave your deal early, your lender may apply an early repayment charge (ERC).

ERCs are intended to compensate the lender for the interest they expected to receive during the fixed or introductory period. For homeowners, the key point is simple: the savings from a new deal need to outweigh the costs of leaving, including any ERC.

What is an early repayment charge (ERC)?

An early repayment charge is a contractual fee set out in your mortgage terms. It may apply when you:

• repay your mortgage balance in full early (for example, by selling the property)
• switch to a new deal with a different lender during the fixed or introductory period
• overpay beyond the allowance your lender permits during the deal
• end the mortgage agreement in a way the contract treats as an early exit

ERCs are often calculated as a percentage of the outstanding balance you still owe. The exact rate, how it’s applied, and how long it lasts depend on the mortgage product and the lender’s terms.

Why do lenders charge ERCs?

Mortgage deals are priced based on expected interest over a set period. When you repay early, the lender may lose the interest they expected to receive for the remainder of the deal.

ERCs are therefore used to:

• discourage frequent switching
• protect the lender’s expected returns
• compensate for lost interest if the mortgage is exited early

In many cases, ERCs are also linked to how long you’ve had the deal and whether you’re still within the lender’s “early” period.

Can you remortgage during a fixed-rate term?

In most cases, yes—you can remortgage while your mortgage is still within a fixed-rate period. A fixed-rate deal sets your interest rate for a defined term, but it doesn’t usually stop you from leaving early.

That said, remortgaging before the fixed term ends is often not a simple “switch to a better rate” decision. The key issue is that exiting early can trigger Early Repayment Charges (ERCs) and/or other contract fees. The question becomes whether the overall savings outweigh the full cost of moving.

When you’re most likely to pay an ERC

ERCs are most commonly triggered when you:

• Remortgage before the end of a fixed-rate or discounted period
• Switch to a new lender while your current deal is still within its early repayment window
• Make certain overpayments that exceed the allowance in your mortgage contract (this can depend on the terms)

If your current deal is ending soon, you may be able to switch with little or no ERC—however, lenders’ rules can vary, and there may be cut-off dates for changes.

How ERCs affect the cost of remortgaging

The “cost of remortgaging” isn’t just the ERC. It’s the total of:

• Early repayment charges from your current lender (if applicable)
• Remortgage fees for the new deal (for example, arrangement/booking fees)
• Legal and conveyancing costs (often needed when switching to a new lender)
• Any product transfer costs (if you’re staying with the same lender)

Because ERCs can be significant, it’s possible to find a cheaper interest rate but still pay more overall if the ERC is high enough. That’s why timing and calculation are crucial.

How early repayment charges are calculated

ERCs aren’t worked out the same way by every lender, but they often follow one of these approaches:

1) Percentage of the remaining balance

Some ERCs are calculated as a percentage of your outstanding mortgage balance. The percentage may reduce over time as you get closer to the end of the deal.

2) Interest-rate based formulas

Other ERCs are calculated using a formula linked to the interest rate difference (for example, what the lender expected to earn versus what they can earn now). This can mean the charge depends on market conditions at the time you redeem.

3) Tiered or time-based reductions

Many lenders apply a reducing ERC the closer you are to the end of the fixed period. In practice, this means remortgaging earlier in the term can be more expensive than switching near the end.

4) ERCs on part of the redemption

If you only repay part of the mortgage (for example, through a partial redemption or certain product changes), the ERC may apply to the portion being repaid—again, depending on the lender’s contract.

Timing: why “when” you remortgage can be as important as “what” you remortgage

Even if two homeowners choose the same new mortgage, their outcomes can differ because ERCs and deal start dates can change the overall cost.

Lock-in arrangements

Some lenders allow you to agree a new product months before the end of your fixed term. The key is that completion happens after the fixed period finishes—so the ERC may not apply.

Waiting until the end of the fixed term

Waiting can simplify the decision because you’re more likely to avoid ERCs. The trade-off is that you may have less certainty over what rates will be when you come to remortgage.

Consider these timing factors:

• How much time is left on your current deal (ERCs often reduce as the end approaches)
• Whether you can align the start of the new deal with the end of the current one
• Whether there are lender cut-off dates for switching or cancelling
• Whether you’re changing lender or doing a product transfer

A mortgage broker can help you map out the likely cost impact based on your current mortgage details and the structure of the new deal.

Staying with your current lender vs switching

Staying with the same lender

If you remortgage with your existing provider, you may be able to:

• reduce the complexity of the process
• benefit from familiarity with your account

But it’s important to confirm whether moving to a new product triggers an ERC. Some internal switches can still be treated as an early repayment event.

Switching to a different lender

Switching can sometimes offer better value or different features. The process typically involves:

• a new lender assessment (including credit and affordability checks)
• a valuation of the property
• legal work to complete the remortgage

Even if the application process feels similar to your original mortgage, it’s still a new lending decision.

Remortgage to a new lender vs a product transfer

There are two common routes to change your mortgage terms:

1. Remortgaging to a new lender — This typically involves taking out a new mortgage elsewhere. If you’re leaving the fixed deal early, this route is more likely to involve ERCs and/or exit fees.

2. Product transfer (staying with the same lender) — A product transfer keeps your mortgage with the same lender but changes the product you’re on. This can sometimes reduce certain costs compared with moving lenders, but it may not always deliver the same outcome as a full remortgage—particularly if your goal is to restructure your mortgage or access a different set of terms.

If you’re moving home: consider porting

If you’re planning to relocate, porting may allow you to transfer your existing mortgage to a new property (subject to lender approval and meeting lending criteria).

Porting can be relevant because it may help you avoid ERCs that would otherwise apply if you repaid the mortgage early. However, it doesn’t guarantee that a new lender won’t offer a better overall deal.

The true comparison: ERCs versus savings

To judge whether remortgaging is worth it, you need to compare the total cost of switching against the expected benefit.

A practical comparison usually looks like this:

1. Estimated savings from switching (for example, lower interest and/or a different mortgage structure)
2. Total cost to leave, including ERCs/exit fees
3. Additional remortgaging costs (often overlooked when comparing headline rates)

A useful way to think about it is:

• Upfront costs (ERC + remortgage fees)
• Ongoing savings (typically driven by the interest rate and mortgage term)

If the ERC is high, you may need to stay on the new deal long enough for the monthly savings to “catch up” with the upfront costs.

Why headline rate comparisons can be misleading

It’s easy to focus on the advertised interest rate on a new deal. But the net result depends on what you actually pay overall.

Key things that can change the outcome include:

• whether ERCs/exit fees apply based on completion timing
• the total remortgaging costs (fees, legal work and any valuation requirements)
• whether the new deal fits your remaining term and mortgage structure
• how long you have left on the fixed period when the switch completes

A deal with a lower rate may still be less cost-effective once all charges are included.

Other costs to remember when switching deals

Beyond ERCs, remortgaging can bring additional expenses. Common items include:

• Arrangement or booking fees for the new mortgage
• Conveyancing and legal fees when moving to a new lender
• Deed of release or similar charges from your current lender (where applicable)
• Valuation fees (if a valuation is required for the new mortgage)
• Broker fees (some advice arrangements are fee-free, while others may charge—this depends on the broker and the type of service)

If you’re considering adding borrowing (for example, to release equity), it’s also worth checking how that interacts with ERCs and the overall remortgage cost.

How to get a mortgage with no early repayment charge

Some mortgages are described as having no early repayment charge, but it’s important to understand that “no ERC” doesn’t always mean “no conditions”.

Common points to check include:

• whether the product is truly ERC-free for the whole deal period
• whether ERCs are removed after a certain number of years
• whether specific events still trigger charges
• whether overpayment limits still apply

A broker can help you compare the practical differences between products labelled “no ERC” and those where ERCs reduce over time.

What “no ERC” mortgages are available?

ERCs are more common on some mortgage types than others. Below are the main product categories where you may see no-ERC options.

No ERC tracker mortgages — Tracker mortgages follow a reference rate, and in some cases the ERC position can change depending on where you are in the mortgage lifecycle.

No ERC interest-only (IO) mortgages — Interest-only mortgages can be relevant for landlords and some investors who want to refinance more regularly. No-ERC interest-only options may be available, but they may come with tighter underwriting requirements and different fee structures.

No ERC fixed-rate mortgages — Fixed-rate deals are where ERCs are most commonly encountered. However, some fixed-rate mortgages have been offered with reduced or no ERCs. When comparing these, it’s worth looking beyond the headline ERC position and considering the overall cost structure, including arrangement fees and the interest rate.

Advantages of a no ERC mortgage

A no ERC mortgage can be a strong fit if you value flexibility:

• More flexibility to switch or remortgage — If you think you may want to change mortgage provider, refinance, or restructure your borrowing during the deal period, a no-ERC approach can reduce the risk of paying a large exit fee.
• Greater confidence if your income or plans are uncertain — If your income is variable or you expect life events that could affect your mortgage strategy, avoiding ERCs can make it easier to respond without being penalised for moving.
• Potential savings versus paying an ERC — Even if a no-ERC mortgage has a different pricing structure, it may still be cost-effective if it helps you avoid ERCs that would otherwise apply to a planned switch.

Disadvantages and trade-offs to consider

No-ERC mortgages are not always the cheapest option, and the trade-offs matter:

• They can cost more overall — It’s common for no-ERC mortgages to come with higher interest rates than ERC-bearing alternatives and higher arrangement fees. The right choice depends on your likely timeline—if you’re unlikely to exit early, an ERC-bearing deal might still work out better.
• Fewer lenders and narrower product choice — Because no-ERC mortgages reduce the lender’s protection, the market can be more limited. That can mean fewer product options, more specific lending criteria, and less competitive pricing in some cases.
• Overpayment rules may still apply — Even where ERCs are removed, lenders may still set overpayment limits or treat certain payments differently. Always check how overpayments are handled in the mortgage offer.

How to avoid early repayment charges when remortgaging

If you’re remortgaging, timing and contract details are crucial. The goal is to avoid triggering ERCs while still achieving the refinance you need.

1) Check your current deal’s ERC period and overpayment allowance

Before planning a switch, review:

• when the ERC period ends (if it reduces over time)
• what counts as an “early exit” under your mortgage terms
• your annual overpayment allowance and what happens if you exceed it

2) Consider switching at a point that reduces or removes the ERC

Some mortgages have ERCs that reduce as the deal progresses. If you’re close to the point where the charge drops or disappears, waiting can reduce the cost of switching.

3) Look at alternatives to a full exit

Depending on your situation, you may be able to:

• change the way you repay within the same lender (where permitted)
• use product transfer options rather than a full remortgage

These approaches can sometimes avoid the “new lender” trigger that would otherwise apply.

4) Porting may be relevant if you’re moving home

If you’re moving, porting can allow you to carry your existing mortgage deal to a new property (subject to lender rules). Porting may help you avoid certain exit fees.

5) Overpay within the permitted limits

Many mortgages allow additional payments each year without triggering ERCs. Staying within the allowance can help you reduce interest over the long term while avoiding charges.

What happens if your circumstances have changed?

Remortgaging early often means you’re applying sooner than planned. If your situation has changed since you took out your current mortgage—such as:

• income changes
• changes to household composition
• additional borrowing or debts
• changes to the property’s value or condition

—this can affect what deals are available and the outcome of lender assessments.

Practical steps to understand your ERC exposure

Before deciding to remortgage, it helps to:

• Check your mortgage offer/terms for ERC wording and any overpayment allowances
• Find out the ERC amount or how it’s calculated (and whether it reduces over time)
• Confirm the redemption date you would be redeeming on (ERCs can depend on timing)
• Compare the full cost, not just the interest rate

Because ERCs can be complex, having the exact figures from your current lender (or a clear calculation method) is often the difference between a good decision and a costly one.

When remortgaging may still make sense despite ERCs

Even with ERCs, remortgaging can be worthwhile if:

• The ERC is relatively low because you’re close to the end of the deal
• The new mortgage offers meaningful savings over the time you expect to keep it
• You’re switching for reasons beyond rate (for example, changing from variable to fixed for stability), and the overall cost still works
• You’re able to reduce borrowing costs through product structure or term changes

The key is to ensure the decision is based on the net cost over time, not just the headline rate.

Common pitfalls to avoid

• Assuming product transfers are always ERC-free. Always check the terms.
• Not accounting for all fees. ERCs are only part of the total cost.
• Focusing only on the headline rate. Consider fees, repayment type, and overall cost.
• Underestimating the impact of changed circumstances. Lenders may assess you differently now.
• Leaving it too late to manage timing. If you’re aiming to lock in early, plan around the lender’s process.

Summary: how to factor ERCs into the cost of remortgaging

• ERCs may apply if you leave your current deal early.
• The cost of remortgaging includes more than ERCs—fees and legal costs matter too.
• ERCs are often time-dependent, so timing can significantly change the outcome.
• The best decision is based on total upfront costs versus expected ongoing savings.
• You can usually remortgage during a fixed-rate term, but leaving early often triggers ERCs and/or exit fees.
• No-ERC mortgages can offer flexibility but often come with trade-offs in pricing and product choice.

If you’re planning a remortgage, understanding your ERC position early helps you compare options accurately and avoid paying more than necessary. A mortgage broker can help you calculate the full cost and identify which approach works best for your circumstances.