An Early Repayment Charge (ERC) is one of the most important numbers to check before remortgaging mid-deal, because it can quietly erase some or all of the savings a lower rate elsewhere might otherwise offer. Here's how ERCs actually work and how to weigh them properly.

What an Early Repayment Charge is

An ERC is a fee charged by your current lender if you repay all or part of your mortgage — including by remortgaging elsewhere — before the end of an agreed fixed, tracker or discount deal period. It exists to compensate the lender for the funding arrangements they made based on you staying for the full agreed term.

How ERCs are typically calculated

Most ERCs are charged as a percentage of your outstanding mortgage balance, commonly somewhere between 1% and 5%, and frequently structured to taper down the longer you've been in the deal — for example, 5% in year one of a five-year fix, reducing by roughly one percentage point each subsequent year.

Example: On an outstanding balance of £220,000 with a 3% ERC, leaving the deal early would cost £6,600 — a figure that needs to be weighed directly against the savings a new, lower rate would deliver over the time remaining.

Where to find your exact ERC

  • Your original mortgage offer document, which sets out the ERC schedule for your specific deal
  • Your annual mortgage statement, which sometimes states the current applicable percentage
  • Directly from your lender, who can confirm the exact current charge based on your balance and remaining term

When paying an ERC to switch can still make sense

If the interest savings from a significantly lower rate, calculated over your likely remaining time with the new deal, outweigh the ERC itself plus any other switching costs, it can still be financially worthwhile to switch even after paying the charge. This is particularly relevant during periods when rates have moved significantly since you took out your current deal.

How to run the comparison properly

  1. Confirm your exact ERC amount directly with your current lender.
  2. Calculate the total interest cost of staying on your current deal for its remaining term.
  3. Calculate the total interest cost of switching, including the ERC and any other fees (arrangement fees, legal costs).
  4. Compare the two totals over a consistent time period, not just the immediate monthly payment difference.

Our Remortgage Cost & Savings Calculator is built specifically to run this comparison, factoring in the ERC alongside rate differences and other fees.

Ways to reduce or avoid an ERC

Worth checking: Some mortgages allow limited penalty-free overpayments each year (often up to 10% of the balance) even during a fixed term — reducing your balance ahead of a full switch can sometimes lower the eventual ERC slightly, though it won't remove it entirely. Porting your mortgage to a new property, rather than repaying it outright, can also avoid an ERC altogether in some circumstances — see our guide on porting your mortgage.

What happens if you're near the end of your deal

If your current deal is ending within the next few months, it's often worth simply waiting until it expires naturally before switching, since the ERC would otherwise apply for what might be a relatively short remaining period, while a new deal secured in advance can typically begin the moment your old one ends.

The bottom line

An Early Repayment Charge isn't automatically a reason to avoid switching, but it must be calculated precisely and weighed against the real savings on offer, not just assumed to be an insurmountable barrier or ignored entirely. When in doubt, run the numbers properly, or ask a broker to do the comparison for you before committing to a mid-deal switch.

This article is for general information only and does not constitute financial, legal or tax advice. Rates, thresholds and eligibility criteria change over time — always check current terms with the lender or an FCA-regulated adviser before making a decision. See our full terms and disclaimer.