Early repayment charges
In this guide
What is an early repayment charge?
When you take out a mortgage you agree to repay it over a set period and a set amount each month. If you decide to repay your full balance early or repay more than the lender allows, you may have to pay an early repayment charge (ERC).
When may you have to pay an early repayment charge?
You may need to pay an ERC if:
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You overpay on your mortgage
Usually, you can overpay up to 10% of your mortgage balance. If you choose to repay more than this, you may have to pay an ERC.
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You choose to remortgage or switch your deal early
You may be charged if you want to switch to a new deal before your mortgage product ends, possibly to lower your monthly repayments.
If you want to switch to a new lender, the ERC will be automatically added to your outstanding balance. You have the choice to use your own money to pay this or you can add it to the balance when you transfer to the new provider.
If you want to switch your deal before your renewal window but with the same provider, you have to pay the ERC with your own money. -
You sell your home
Whether you decide to move home or sell your property, you may have to pay an ERC to end your deal early.
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You wish to port mortgage
If you want to port your mortgage but your circumstances have changed, the lender may refuse your request. You may then wish to end your mortgage early and pay any charges before going to a new lender.
Amir’s story
Amir owns a two-bedroom flat. He has received a lump sum of £50,000 from his family. He wants to put it towards his mortgage. His outstanding mortgage is £250,000. He can overpay up to 10% of this mortgage balance each year. Meaning he can repay £25,000 free of charge.
However, he must pay an ERC fee for anything over that 10%. In this case it is £25,000.
His early repayment charge would be 5% of that £25,000 extra, which would be £1,250.
This means he would repay £48,750 and pay £1,250 as a fee. His mortgage balance would be reduced to £201,250.
How much is an early repayment charge?
The amount you need to repay will be different depending on your mortgage product and lender. You can typically expect to pay between 1 and 5% of your outstanding balance if you repay in full. If you want to pay over your allowance, which is usually around 10%, you would be charged between 1 – 5% of the extra amount you want to pay.
You can find out how much your ERC is for your Principality mortgage by reading your mortgage documentation, checking your online profile, or calling one of our mortgage team.
- Mortgages
Next Steps
If you want to discuss your options or request a redemption certificate please get in touch.