How are early repayment charges calculated?
Early Repayment Charges can be calculated in several different ways. The charge will be based on the amount of the mortgage redeemed and will usually either be a percentage of the amount redeemed or a number of months interest. If the latter approach is adopted by the lender, the rate of interest used in the calculation may be based on the lender’s Standard Variable Rate (SVR) or the actual fixed/capped/discount rate being paid, or the higher of the two. Sometimes the charge remains the same during the whole period of the special rate; for other mortgages it decreases over the special rate period. However, there are some mortgages, usually discount mortgages, where the charge actually increases during the special rate period. It is worth bearing in mind that most lenders will allow you to move your mortgage with you to a new home without incurring an Early Repayment Charges (commonly known as a portable facility). Some lenders will allow you to make some charge free repayments (beyond
