Redemption
Last checked UK · illustrative onlyNot a lender or brokerAboutDisclaimer
Published by Rodway Labs — not a mortgage adviser
Published · Last revised
Redemption: Paying off a mortgage, in full or in part. A full redemption is what happens when you remortgage to a new lender or sell.
Before a full redemption, your lender issues a redemption statement: the amount needed to clear the loan on a stated date, including the balance, any early repayment charge, any exit or admin fee, and interest to that date. That statement beats an estimate from any calculator.
A partial redemption, such as a lump-sum overpayment, reduces the balance without closing the account. An early repayment charge may apply to the part above any overpayment allowance.
A UK redemption statement is valid for a stated date because interest runs daily up to the day the loan is repaid. Ask for one dated to your planned completion. It should list any early repayment charge and the exit (mortgage account closure) fee separately.
Example: redeeming now or at the end of the deal
- Today
- £185,000 at 4.19%, 4 months left, ERC 2%
- Redeem today
- £185,000 + £3,700 ERC = £188,700, plus any exit fee and interest to the date
- Redeem when the deal ends
- after four payments of about £1,074 the balance is about £183,280 · no ERC, plus any exit fee
- Extra interest from switching to 5.97% four months early
- about £1,096
Illustrative only. Exit fees vary and are not included. Your lender’s statement is the figure that counts.
How it affects a remortgage
Redemption is the moment an early repayment charge bites. A remortgage to a new lender redeems the old loan in full, so the completion date decides whether the charge is due. In the example, completing after the deal ends instead of four months early is worth about £4,796.
A product transfer often does not redeem the loan, which is why the old charge often does not apply. Confirm that on the retention offer.
Statements are dated. If completion slips, ask for an updated figure, and check that completion falls after the charge end date.
Example: what a short delay or a part redemption costs
- Daily interest on £185,000 at 4.19%
- about £21.24 a day (£185,000 × 4.19% ÷ 365), if interest is charged daily
- Completion slips by 14 days
- about £297 more interest on the redemption statement
- Part redemption of £18,500 (10% of the balance)
- inside a 10% yearly allowance, so no ERC on the example terms
- Part redemption of £25,000
- £6,500 above the allowance · 2% of that is £130, or £500 if the offer charges on the whole £25,000
Illustrative only. Lenders differ on whether interest is worked out daily, monthly or yearly, and on how an allowance works. The offer and the lender’s own statement decide.
Common mistakes
- Treating the balance on an annual statement as the redemption figure. A redemption statement adds interest up to the redemption date, any ERC and any exit fee, so while the example deal is live it is at least £3,700 higher than the balance.
- Using an out-of-date statement. A figure dated for the 1st is not right for the 15th, because interest keeps running. In the example, two weeks adds about £297.
- Assuming a product transfer is a redemption. It usually is not: the loan stays with the same lender and the old charge often does not apply. Moving to a new lender always redeems the old loan in full.
- Overlooking the yearly allowance on a part redemption. A £25,000 payment against an £18,500 allowance can trigger a charge on the excess that a smaller payment would not. The offer says how the allowance resets.
Edge cases
- Completion either side of the ERC end date. The charge depends on the date the loan is actually repaid, not the date you applied, so a delay can remove the charge and an earlier completion can add it.
- Interest worked out yearly rather than daily. MoneyHelper notes that with daily interest an overpayment helps from the day it lands, while with annual calculation the timing within the year matters more.
- Two products on one account. If part of the loan sits on a separate deal, for example a further advance, each part can have its own end date and ERC, and the statement may show two charges.
- Moving home and porting. If the deal is ported, the old loan may not be redeemed at all; only any part not carried across is repaid, and the charge (if any) applies to that part.
Where to go next
- ERC estimator — the charge on a full or part redemption.
- Early repayment charges — pay now or wait, worked through.
- How long a remortgage takes — timing completion against the end date.
- Remortgaging early: pay the ERC or wait? — when paying the charge can make sense, worked through.
Sources checked 2 November 2026
- MoneyHelper: remortgaging to cut costs — remortgage and product transfer definitions, switching costs, LTV formula, valuations, porting and negative equity.
- MoneyHelper: should you pay off your mortgage early? — overpayment allowances (many lenders allow 10% a year) and how daily or annual interest affects timing.
- FCA: support with mortgages and interest rates — offers typically valid 3 to 6 months, reversion rates, same-lender switches, ERCs and stress testing.
Figures marked example are illustrative only, not a quote and not lender, broker or FCA-regulated advice. Definitions are plain English for this site, not the wording in your offer. The definitions and explanations are in our own words. Last checked 2 November 2026.