Can I negotiate my early repayment charge with my lender?

While ERCs are typically fixed in your mortgage terms, some lenders may be willing to waive or reduce charges in exceptional circumstances, such as job loss, serious illness, or relationship breakdown. It's always worth calling your lender to discuss your situation - the worst they can say is no.

Do early repayment charges affect my credit score?

No, paying an early repayment charge won't directly impact your credit score. ERCs are contractual fees, not missed payments or defaults. However, if you can't afford to pay the charge and it prevents you from making your regular mortgage payments, that could affect your credit rating.

What happens to my ERC if interest rates rise after I took out my mortgage?

Your ERC remains the same regardless of what happens to interest rates after you took out your deal. The charge is based on the terms you agreed when you signed your mortgage contract, so even if rates rise dramatically, you'll still pay the same ERC percentage if you exit early.

What are early repayment charges? When do I pay them?

Understand when early repayment charges apply, how much they cost, and how to avoid paying them when remortgaging.

Last updated 27 Nov 2025

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Key takeaways

Early repayment charges are fees (typically 1-5% of your outstanding balance) for breaking your mortgage deal early

They usually only apply during your initial deal period (2-5 years), not for your entire mortgage term

You'll face ERCs when remortgaging, making large overpayments, or paying off your mortgage during the charge period

Most lenders allow 10% annual overpayments without penalty - time your remortgage to avoid charges entirely

Calculate whether long-term savings justify the upfront ERC cost before switching deals early

Early repayment charges guide

Early repayment charges (ERC) can cost you thousands of pounds. They might apply to you if you’re getting a mortgage, looking to remortgage or pay off your mortgage. It's important to understand these potential charges and how to avoid them before making any decisions.

What is an early repayment charge?

An early repayment charge is a fee your mortgage lender charges if you remortgage or pay off all or part of your mortgage earlier than agreed. Think of it as a penalty for breaking the terms of your mortgage deal before the agreed period ends.

How are ERCs calculated

You’ll likely encounter ERCs during the initial period of a fixed-rate, tracker, or other mortgage deal – they typically apply in the first 2-5 years. The percentage may change as your mortgage goes on.

An early repayment charge is usually calculated as a percentage of your outstanding mortgage balance. Usually between 1% and 5% (depending on your mortgage deal), meaning it could cost you thousands.

Early repayment charge example

If you have a £200,000 mortgage with a 5% charge for the first year, your ERC would be £10,000. If this reduces in the second year to 4%, and assuming your ERC is based on the outstanding balance which is now £185,000 for example, your early repayment charge would be £7,400.

It's important to understand that ERCs aren't just about paying off your entire mortgage. They can also apply when you make overpayments above your lender's annual allowance (usually 10% of your outstanding balance), switch to a different mortgage product, or remortgage to a new lender during the charge period.