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Early repayment charges
What are they?
Some mortgages have charges for repaying all or part of the mortgage back within a certain time. We call these early repayment charges (ERCs).
To see if any ERCs apply to you, you can check your mortgage statement or offer. Or, you can contact us on 0345 727 3747.
If you have a hearing or speech impairment, you can contact us using the Relay UK service. There’s more information on the Relay UK help pages. If you’re Deaf and a BSL user, you can use our BSL SignVideo service.
When do we charge them?
You’ll be charged if you do any of these:
- Pay more than your yearly overpayment allowance.
- Pay off your mortgage or specific sub-account in full before the end of your ERC period.
- If you’re on a fixed rate and you switch to a new mortgage deal early.
Keep in mind: An ERC could be payable up to and including the last day of your deal.
ERCs are calculated and applied on the date we receive your payment or you switch to a new deal
It might be best to wait until your ERC lowers or ends before you make a payment. For example, your offer letter or redemption statement shows your ERC rate will go down on 01 July. If you make your payment on 30 June, you’ll have to pay more.
What is an overpayment allowance?
Where ERCs apply, you can make overpayments of up to 10% of the amount owed as of 01 January.
If you overpay more than 10% over the year, we'll only charge you on the balance you overpay above 10%.
Here’s an example:
Amount you owe on 01 January: £50,000
Your overpayment allowance: 10%
This means you can overpay up to £5,000 in that calendar year without any ERCs.
If you pay more than your overpayment allowance:
Amount you overpay: £8,000
Amount you’ve paid over your overpayment allowance: £3,000
Your ERC: 5%
Total ERC payable (£3,000 x 5%): £150
If you’d like to know your overpayment allowance, you can request it here or call us.
Keep in mind: We can change the overpayment allowance at any time, so please check before you make any overpayments. We’ll always give at least three months’ notice before we do this.
Why do we charge ERCs?
When you take out a mortgage with us, we expect it to be paid back over its full term. There’s a cost to us if some or all of the money is paid back early. ERCs are designed to compensate us for this cost.
How is it worked out?
The amount you’ll be charged will be based on:
- Your ERC (for example, 5%)
- Whether you repay all or part of the mortgage
- The amount you owe when you make the payment.
The amount you can be charged is in your offer letter and Mortgage Illustration. It can also be worked out like this example:
Amount you owe on your mortgage: £100,000
Your ERC: 5%
Maximum ERC payable (£100,000 x 5%): £5,000
This means if you paid your mortgage off in full, the ERC payable would be £5,000.
Additional info
If you pay your mortgage off in full within six months of making any overpayments, we'll apply an ERC. We’ll use your mortgage balance from six months ago to work out your ERC, not your balance after you made any overpayments.
You won’t have to pay any ERCs if you move home and we agree you can transfer your current deal to your new mortgage, known as porting.
