Financial Glossary of Finance Terms Early Repayment Charge (ERC)

Early repayment charges are added to almost all mortgages. Usually this is for the period of a special package ie. a 2 year fixed mortgage will have an early repayment charge if the mortgage is redeemed or paid off within the 2 years.

The percentage can vary according to which lender you are with and some lenders may stagger the early repayment charge as below:-

5% of the mortgage amount in year one, 4% in year two; 3% in year three, 2% in year four and 1% in year five. Or they may charge, say the equivalent of six months interest.

Mortgages Expert usually looks for mortgage products with No Early Repayment Charge Overhang. This means that after the inital period there are no charges to repay the mortgage only if paid during the period. We would also look to ensure the mortgage is portable as if you wish to move it again avoids the early repayment charges.