What is an early repayment charge?
An Early Repayment Charge is a charge made by your mortgage lender which is payable on certain types of loan. The charge is only applied if the loan is paid off or part-paid off within the specified early repayment charge period agreed with you at the outset of the mortgage being set up. This is possibly the downside of benefiting from the certainty conferred by fixed rate or the cheaper mortgage offered by a discounted rate some lenders can lock you into a repayment charge so beware and get advice. If you see an incredibly good interest rate below the rate prevailing on variable rate the chances are they want something in return – your commitment, therefore it could mean it’ll cost you a lot more if you decide to move lender in future.
An Early Repayment Charge (ERC) is a penalty for paying all or part of your mortgage early. Early repayment charges are usually part and parcel of a mortgage product that has a preferential promotional period, such as a fixed, capped or discounted interest rate. The penalty is levied if the mortgage is settled during the lock-in period associated with this type of scheme. For further information please see our Early Repayment Charges glossary page.
