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Early Repayment Charges, known as ERCs, are penalties, usually a fixed percentage of the total borrowed, if the borrower exits their mortgage during the initial offer period.

Early Repayment Periods apply to almost all fixed rate, and most discount rate, mortgages. It usually applies to the initial offer period, only; often shorter than the overall term of the mortgage loan. For example, a five year fixed rate offer, on a 20 year term, will usually have a five year ERC.

The ERC discourages borrowers from early redemption, meaning early repayment of their mortgage, either in full or in part. It protects lenders that have provided a mortgage type at a discount to their typical Standard Variable Rate.

A borrower that chooses to end their mortgage early, during their ERC Period, is likely to suffer an additional charge. For example, a two percent ERC on a £200,000 mortgage, could mean a charge of £4,000 - this would be paid by the borrower if exiting their mortgage early during their ERC period.

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Q&A for First Time Buyers
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Explain Mortgages is a trading style of The Right Broker Limited, an appointed representative of The Right Mortgage Limited, which is authorised and regulated by the Financial Conduct Authority. The Right Mortgage Limited. Registered address: St Johns Court, 70 St Johns Close, Knowle, Solihull, B93 0NH. Registered in England and Wales. Company No. 08130498.

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Your home (or property) may be repossessed if you do not keep up repayments on your mortgage.

These videos are not intended to provide professional mortgage advice and should not be relied upon or regarded as a substitute for such advice. The information contained within each video is for illustrative and information only. Information is aimed at UK consumers only. We recommend that you seek advice from a qualified professional mortgage advisor before acting on any information or other content appearing within these videos.