Early repayment charge: pay it now or wait?

This page covers one decision: pay the ERC now, or wait until it ends. For how ERC methods work and the ERC calculator, see the linked pages.

The short answer: it is usually cheaper to wait until the early repayment charge (ERC) ends and switch that day. In the shared EXAMPLE, a 2% ERC is £3,700, while leaving four months early saves only about £31 of interest. Paying the charge can make sense when it is small, a much lower rate would run for many months, or you are selling and can’t port.

An ERC is the charge in your offer for repaying some or all of the mortgage during a deal period. On a remortgage it is often the line that outweighs a small rate gap, and any cashback clawback is a separate clause. The method maths is on how ERCs are calculated and the definition is the glossary entry. Your offer or ESIS gives the date the charge ends. Last checked: 15 October 2026.

When the charge bites

• Full redemption during the deal. Selling, or remortgaging to a new lender, before the deal end date. This is the case that usually produces the large figure.
• Overpayment above the allowance. The charge, if the offer says so, applies to the excess only — not automatically to the whole balance. The allowance amount is in the offer, not in a generic “10%” assumption.
• A transfer that is really a redemption. A product transfer that does not redeem the loan often avoids the old ERC. If the “transfer” is documented as a new loan that pays the old one off, the charge can still apply. The retention offer should say which.
• Not after the end date. Once the schedule says the charge is nil, leaving is no longer an ERC question. It can still be an SVR question if nothing else is in place, and it can still be a fee question.

Stepped schedules change the amount as each year of the deal passes. The bite is the year you are actually in, not the percentage from year one of a five-year fix. Match the estimator to that row. Do not copy a blog’s round number.

What to put beside it

Compare four things, in this order, before you chase a headline rate:

• The ERC on the redemption statement, or a careful reading of the clause.
• The fee stack to leave: product, legal, valuation, broker, and any exit fee. Ranges for a remortgage are on remortgage fees.
• Interest you might save over a horizon you choose — often the length of the new fix — using the true cost calculator.
• What waiting costs if you stay until the charge ends, including any time on the follow-on rate. Timing the calendar is when to remortgage, and leaving before the end date is remortgaging early.

A cheaper new rate that does not cover the ERC plus fees over that horizon is not cheaper. A transfer that avoids the charge can win even with a higher rate. Those are comparison outcomes, not advice. Estimate the charge in the ERC estimator only after you know which method the offer uses, then follow the method steps on the maths guide rather than rebuilding them here.

EXAMPLE: pay the ERC now, or wait until it ends?

The shared site house, illustrative only and not advice: £185,000 · 22 years left · current EXAMPLE 4.19% with 4 months to run · EXAMPLE ERC 2% of balance · new-lender EXAMPLE 4.14% · fees £1,499 less £250 cashback. Scenario rates, not a market quote.

• ERC if you leave today: £185,000 × 2% = £3,700.
• Interest saved by leaving early: over the 4 remaining months, interest is about £2,575 at 4.19% and about £2,544 at 4.14%. Switching early saves about £31, or about £5 a month on the payment.
• Fees: the £1,249 net fee stack is paid whether you switch now or at the deal end, so it does not change the timing answer.
• Result: leaving now costs about £3,700 − £31 ≈ £3,669 more than waiting four months and switching on the end date.

To break even over 4 months, the new deal would have to save about £925 a month in interest (£3,700 ÷ 4). A whole month’s interest at 4.19% on £185,000 is only about £646, so in this EXAMPLE no rate cut could cover the charge. Waiting is cheaper.

Waiting tends to win when the charge is large next to the months left. Leaving early can win when the charge is small, for example in the last year of a stepped schedule or a short months-of-interest rule, and a large rate gap would run for many months. It can also be unavoidable if you are selling and cannot port. Waiting does not mean doing nothing. Offers are typically valid for around three to six months, so you can usually line up a new deal to start on the day the charge ends. The steps are on when to remortgage.

ERC structures vary. Many are tiered by year, typically stepping down as the deal goes on, and some use months of interest instead. The 2% here is one EXAMPLE row, not a typical rate. Check your offer or ask for a redemption statement for the figure that applies on your date. A stepped worked example is on how ERCs are calculated, and you can test the full switch in the true cost calculator.

Independent consumer material from MoneyHelper stresses checking costs before you switch, and UK Finance publishes industry context on the mortgage market.

Stepped schedules and overpayment allowances

A stepped ERC falls each year of the deal, and an overpayment allowance can mean the charge applies only to the excess. Which rate to enter for the year you are in, with a worked 5/4/3/2/1% schedule, is on how ERCs are calculated.

Cashback clawback is separate from the ERC formula. If the offer says cashback must be repaid when you leave early, treat that repayment as its own line beside the charge and beside the fee stack.

Disclaimer

Illustrative only — not personalised advice, not a mortgage offer, and not an FCA-regulated recommendation. ERC methods are lender-specific. Check your offer wording.