Mortgage Early Repayment Charge

24/08/2018
Most mortgage products include within their terms a Mortgage Early Repayment Charge (ERC) that is payable if you repay your mortgage within the early repayment charge period. The period of time normally ties into an incentive period such as a fixed rate of 2, 3 or 5 years so if you repay your mortgage in part or in full during this period, then the mortgage lender will charge you an additional early repayment charge. 

The charge can be considerable which often means you are locked into the mortgage for a period of time, although click here to find out how you can avoid paying your redemption penalty.

How much is the Early Repayment Charge?

The ERC varies depending on your mortgage product, however lenders normally charge either a:

  • Fixed fee which is a fixed ERC percentage that runs for the life of the mortgage product; or a
  • Tiered fee which has different ERC percentages for different times during the mortgage term.

Here are some examples:

These are examples and mortgage lenders charge different ERCs depending on the specific mortgage product.

Halifax Bank Plc Early repayment charges apply in the first 2 years of the mortgage. 1.30% of the amount repaid on or before the first year and 0.80% of the amount repaid on or before the second year.

HSBC Bank Plc The Early Repayment Charge is 1.00% of the amount repaid early (above any overpayment allowances provided for in Section 11) for each remaining year of the Early Repayment Charge Period.

Barclays Bank Plc trading as The Woolwich Early repayment charges are payable on this mortgage until [End Date of Early Repayment Charge Period] at a rate of 3% of the amount repaid.

Leeds Building Society An Early Repayment Charge applies to this Mortgage as set out below and is payable if one or more of the following occurs: 1. If you redeem or substantially repay the Loan; and/or 2. You transfer to another mortgage Product.The Early Repayment Charge is 3% of the outstanding balance of your loan during months 1 to 12 and 2% of the outstanding balance of your loan during months 13 to 24.

Metro Bank Plc Early repayment charges apply in the first 5 years of the mortgage. 5% of the amount repaid in the 1st year, 4% of the amount repaid in the 2nd year, 3% of the amount repaid in the 3rd year, 2% of the amount repaid in the 4th year and 1% of the amount repaid in the 5th year.

Virgin Money If you transfer to a new mortgage product with Virgin Money plc or repay your mortgage in full before [End Date of Early Repayment Charge Period] you will be charged an Early Repayment Charge of 1.50% of the outstanding loan amount.

Nationwide Building Society Early repayment charges are payable on this mortgage for the first 24 months after the end of the month in which you take the loan. The Early Repayment Charge is 2% of the amount repaid in the 1st year and 1% of the amount repaid in the 2nd year.

National Westminster Bank Plc If you repay all or any part of your mortgage on or before the end of the fixed rate term, you will have to pay an Early Repayment Charge on the amount repaid. 5% of the amount repaid in the 1st year, 4% of the amount repaid in the 2nd year, 3% of the amount repaid in the 3rd year, 2% of the amount repaid in the 4th year and 1% of the amount repaid in the 5th year.

Click here to find out how you can avoid paying your redemption penalty

Why do mortgage lenders charge an Early Repayment Charge?

Mortgage lenders have secured the funds for a set period of time and they expect you to repay that money over the pre-agreed mortgage term. When the mortgage is repaid early the mortgage lenders incur a cost and as such the ERC compensates mortgage lenders for this.


Do you need help to remortgage early?

We have a specialist remortgage department with mortgage brokers and dedicated remortgage conveyancing solicitors. For further help call us on 0207 112 5388 or you can book an appointment with our broker or get a quote for our remortgage conveyancing.

* Access to whole of the market – Available Outside of Work Hours – No need for face-to-face meeting - Terms Apply

Free Mortgage Consultation, 100% independent with access to the whole of the mortgage market.

 

Are there Mortgages without Early Repayment Charges?

Yes there are and it depends on the type of mortgage product you opt for. The mortgage products that don't charge often have an 'Exit or Redemption fee' to pay which can range between £50 and £500. To check to see if you have a mortgage with no repayment charge you should review your original mortgage offer and it should state something like this:

Early Repayment Charge (ending your mortgage)
There are no early repayment charges if you wish to repay this mortgage, although a mortgage exit fee is payable. The current level of this fee is £125.

Do mortgage overpayments trigger the ERC?

Mortgage lenders normally allow you to make overpayments to reduce the mortgage debt, however this can often be restricted to a certain amount which is normally linked to the remaining mortgage debt. For example:
These are examples and mortgage lenders allow different overpayment amounts depending on the specific mortgage product.

Halifax Bank Plc You are able to make overpayments to this mortgage at any time subject to any early repayment charges detailed in the Early repayment section above. Sometimes you may be offered the opportunity to make lump sum or regular overpayments without having to pay an early repayment charge. Details of any current offers, which can change from time to time, can be found in the 'Information about your mortgage' booklet issued with mortgage offers.

HSBC Bank Plc A capital reduction of 10% per annum can be made without incurring an early repayment charge. This will apply throughout the early repayment charge period.

Coventry Building Society trading as Godiva Mortgages For this mortgage, there are no restrictions on the amount that can be overpaid on this mortgage.

Barclays Bank Plc trading as The Woolwich A capital reduction of 10% per annum can be made without incurring an early repayment charge. This will apply throughout the early repayment charge period.

Leeds Building Society You can make additional capital lump sum payments of up to 10% per year without incurring the Early Repayment Charges.

Metro Bank Plc We will only accept overpayments of £500 or more. You can make overpayments up to 20% of the amount borrowed in each 12 month period.

Virgin Money During the Early Repayment Charge period you are allowed to make overpayments of up to 10.00% of the outstanding balance in each calendar year without incurring an Early Repayment Charge. In the year that your mortgage product commences, the 10.00% allowance will be calculated from the original loan balance. In subsequent years, the 10.00% allowance will be calculated from the balance as at the 31st December of each calendar year.

Nationwide Building Society If you make overpayments totalling more than 10.00% of the original loan advance amount (the Overpayment Allowance), during the early repayment charge period(s) shown in section 10, you will be charged an Early Repayment Charge.

National Westminster Bank Plc You can overpay a maximum of 10% of your outstanding mortgage balance in each 12 month period commencing on completion of your mortgage and continuing from each anniversary of that date until the end date of this rate, without incurring an Early Repayment Charge. If your mortgage is made up of more than one part you can overpay up to a maximum of 10% of the outstanding balance of each part. An Early Repayment Charge will be incurred on any overpayment that exceeds the annual 10% limit.

How long is the Early Repayment Charge Period?

The Early Repayment Charge Period varies depending on the mortgage product however for fixed term mortgage products the period is normally linked to the interest incentive period. For example, on a 3 year fixed rate product, you can expect the early repayment charge period to coincide with when the fixed rate period expires, i.e. 3 years.

Do you need help to remortgage early?

We have a specialist remortgage department with mortgage brokers and conveyancing solicitors. For further help call us on 0207 112 5388 or you can book an appointment with our broker or get a quote for our remortgage conveyancing.

* Access to whole of the market – Available Outside of Work Hours – No need for face-to-face meeting - Terms Apply


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