What is an early repayment charge (ERC)?

The definition, with one worked EXAMPLE. The formulae are on the maths guide, when the charge bites is on the costs page, and the estimator is the tool.

Last checked 2 November 2026UK · illustrative onlyNot a lender or brokerAbout Disclaimer

Published by Rodway Labs — not a mortgage adviser

Published 13 September 2026 · Last revised 2 November 2026

This page covers a short definition. For how ERCs are calculated and pay now or wait, see the linked pages.

An early repayment charge (ERC) is a charge written into many UK mortgage deals if you repay some or all of the loan before the deal period ends. It is part of the contract, and the offer or illustration states how it is worked out and the date it falls away.

Two common methods are a percentage of the amount repaid, which may step down each year, or a set number of months of interest. Many deals also allow an annual overpayment without the charge, with the ERC applying only above that allowance.

EXAMPLE: remortgaging with 4 months left on the deal

£185,000 balance at 4.19%, 4 months left, ERC 2% of the balance.
Redeem now: 2% × £185,000 = £3,700.
Interest saved by moving to a 4.14% deal four months early: about £31.
Waiting until the deal ends: about £3,669 cheaper.
A part repayment of £10,000 above the overpayment allowance, at the same 2%: £200.

Illustrative only, using the site ERC estimator. Your offer says which amount the percentage applies to.

What an ERC is not

Not an exit fee. An exit or discharge fee is an admin charge for closing the account. You can owe both, either or neither.
Not a product fee. A product fee is the price of taking a deal. An ERC is the price of leaving one early.
Not cashback clawback. Repaying cashback when you leave early can sit beside an ERC, but it is a separate condition.
Not the standard variable rate. The SVR is a rate you roll onto after the deal. The ERC has usually ended by then.

How it affects a remortgage

Fees and ERCs often decide a remortgage before the rate gap does. In the EXAMPLE, the charge is more than a hundred times the interest saved by switching early. A cheaper rate is not cheaper if you must pay an ERC to reach it.

A remortgage to a new lender redeems the old loan in full, so the completion date decides whether the charge is due. Many people secure a new deal in advance and time completion for just after the ERC end date. A product transfer with the same lender often does not trigger the old charge, but that is common, not automatic. Check the retention offer.

When you ask to repay, the lender’s redemption statement shows the ERC as its own line. That statement is a better source than any calculator.

Where to go next

ERC estimator — your charge from the method in your offer.
How ERCs are calculated — percentage, stepped and months-of-interest methods.
Early repayment charges — pay now or wait, worked through.

EXAMPLE: the same balance under three ERC methods

2% of £185,000: £3,700
Three months’ interest at 4.19%: about £1,937.88 (£185,000 × 4.19% ÷ 12 × 3)
An EXAMPLE stepped scale of 3%, 2%, 1%, repaid in year 3: 1% × £185,000 = £1,850
Overpaying £18,500 inside a 10% allowance: no charge on the EXAMPLE terms
Overpaying £25,000, charge on the excess only: 2% × £6,500 = £130

Illustrative only, using the site ERC estimator. The stepped scale is an EXAMPLE, not a lender’s schedule. Your offer states the method and which amount it applies to.

Common mistakes

Using the balance at the start of the deal. The charge is worked on the amount repaid at the time, which is lower after years of payments.
Assuming the charge ends at the start of the final month. The end date is in the offer, and a completion one day early can still count.
Comparing deals on rate while a charge is live. In the EXAMPLE, £3,700 sits against about £31 of interest saved by moving four months early.
Forgetting the ERC on the new deal. A longer fix usually means a longer period in which moving or repaying costs money, so the new schedule belongs in the comparison too.

Edge cases

Some deals have none. The FCA notes that the charge is normally a percentage of the remaining balance that falls as the deal nears its end, and that some lenders do not charge one.
Variable charges on the ESIS. Under MCOB 5A, where the charge depends on factors such as the amount repaid, the ESIS has to explain the method and give the maximum or an illustrative example.
Moving home. Porting can avoid the charge on the part of the loan carried across; any part repaid may still be charged.
Overpayment timing. MoneyHelper notes many lenders allow 10% a year without a charge. Whether that is measured on the starting balance or the current one is set by the offer.

Sources checked 2 November 2026

FCA: support with mortgages and interest rates — offers typically valid 3 to 6 months, reversion rates, same-lender switches, ERCs and stress testing.
FCA Handbook MCOB 5A (ESIS rules) — what an ESIS must contain, when it must be given, and how the APRC and early repayment sections are completed.
MoneyHelper: should you pay off your mortgage early? — overpayment allowances (many lenders allow 10% a year) and how daily or annual interest affects timing.

Also see: MoneyHelper’s remortgaging guide covers checking early repayment charges before you switch, and the FCA’s consumer mortgage support page covers moving from a fixed deal to a new one. The exact charge, method and end date are always the ones in your own offer and Key Facts Illustration.

Remortgage Lab is published by Rodway Labs. It is not a lender, not a broker, and not FCA-regulated advice. Figures marked EXAMPLE are illustrative only. Last checked 2 November 2026.