Mortgage Early Repayment Calculator

Most fixed-rate mortgages carry an Early Repayment Charge (ERC) if you repay more than your annual overpayment allowance — typically 10% of the outstanding balance per year — during the fixed period. ERCs usually range from 1–5% of the amount repaid early, declining year by year through the fixed term.

The break-even calculation compares: (A) paying the ERC now and clearing the mortgage or switching to a cheaper rate; versus (B) continuing regular payments until the end of the fix, then remortgaging. If the interest saved in scenario A exceeds the ERC, early repayment makes financial sense.

Opportunity cost also matters. Money used to clear a 4% mortgage earns a guaranteed 4% return but cannot be invested elsewhere. If you can reliably earn more than your mortgage rate in a stocks and shares ISA, investing may be preferable. Mortgage overpayments are guaranteed savings; investment returns are not.

What is an Early Repayment Charge (ERC)? Lenders charge an ERC if you overpay above your annual allowance (usually 10%) or fully repay during a fixed/discount period. ERC is typically a percentage of the amount repaid, tapering down each year: 5% in year 1, 4% year 2, 3% year 3, 2% year 4, 1% year 5 (typical 5-year fix). On a £200k mortgage with 3 years remaining at 3% ERC: full repayment costs £6,000. Always check your mortgage offer for exact ERC structure.

When is paying the ERC worth it? When your new rate would save more than the ERC over the remaining period. Example: £200k mortgage, current rate 6%, new rate available 4%, 18 months left on fix, ERC 3% (£6,000). 2% rate saving × £200k = £4,000/year × 1.5 years = £6,000 saved on rate alone — roughly breaks even. Plus lower payments for the new 5-year deal beyond that. As rule of thumb: switching with an ERC pays off if rates have moved 2%+ in your favour.

Ways to avoid the ERC. Some lenders offer 'porting' — keep your existing mortgage rate when moving home (no ERC). Most allow 10% annual overpayment without ERC. ERCs don't apply once you're on the SVR (Standard Variable Rate). 'Drop-lock' mortgages allow switching to a fixed rate mid-tracker without ERC. Bereavement or genuine financial hardship can sometimes waive ERCs — but lenders aren't obligated. Time your remortgage to land just after a fix expires for ERC-free switching.

How ERCs are calculated. Two common methods: (1) % of outstanding balance (e.g. 3% × £200,000 = £6,000); (2) % of amount being repaid early — only applies if doing a partial overpayment, e.g. paying off £50,000 of £200,000 mortgage at 3% ERC = £1,500. Method 1 is more common. Some lenders also charge a 'deeds release fee' £100-£200 when you fully repay. Read your KFI (Key Facts Illustration) for exact terms before signing.