Mortgage question
When exactly does the mortgage ERC apply (and when doesn't it)?
The Early Repayment Charge (ERC) applies only during a fixed or discount period, and only on overpayments above the 10% annual allowance, on remortgaging to a new lender, or on full redemption (including selling up). It does NOT apply on a product transfer with the same lender, on a ported mortgage, on overpayments inside the 10% cap, or once your fix has ended — even if you then stay on the lender’s Standard Variable Rate.
The trigger list — when ERC is charged
The ERC bites in these situations:
- Full redemption during the fix — selling the property and repaying the loan, unless you port the mortgage to a new property.
- Remortgaging to a new lender during the fix — the new lender pays off your old loan, which counts as redemption.
- Overpaying above the 10% annual allowance — ERC applies only to the excess, not the whole amount (see our 10% rule explainer).
- Switching to a different product with the same lender mid-fix — rare, but some “choose a new rate early” offers still charge an ERC on the old one.
- Bankruptcy or forced sale during the fix — ERC still applies.
When there is no ERC
Equally important is knowing when the charge doesn’t bite:
- Product transfer with the same lender at the end of the fix — you switch onto a new deal, no redemption happens.
- Porting the mortgage to a new property — the existing product continues on the new house, usually with any extra borrowing at a new rate.
- Overpayments within the 10% annual allowance — no ERC even during the fix.
- Full redemption after the fix has ended — once you’re on SVR you can pay off freely.
- Most trackers and SVRs — many have no ERC at all, though some trackers carry a short (typically 2-year) ERC window.
What does a typical ERC schedule look like?
Most UK fixes follow this stepped structure:
| Product | ERC schedule |
|---|---|
| 2-year fix | 2% in year 1, 1% in year 2 |
| 3-year fix | 3% / 2% / 1% |
| 5-year fix | 5% / 4% / 3% / 2% / 1% |
| 10-year fix | 6% years 1-5, stepping to 1% by year 10 |
| Tracker (most) | No ERC |
| Tracker (with ERC) | 1-2% for a short window |
The percentage applies to the outstanding balance at the point you redeem or overpay, not the original loan amount. On a 5-year fix with a £250,000 starting balance, 3 years in with the balance down to £230,000, the 3% year-3 ERC is £6,900.
How does porting dodge the ERC?
Porting moves your existing mortgage product from one property to another. Technically the lender simultaneously redeems the loan on the old house and advances a new loan on the new house at the same rate and ERC schedule. Because the redemption and new advance happen on the same day with the same lender, no ERC is triggered.
Two things can break porting:
- Affordability fails on the new property. If your income has dropped or the new loan amount is higher, you may not pass the fresh check.
- Property valuation fails. The new home has to meet lender criteria, same as a new application.
If porting fails, you pay the ERC on redemption and apply for a fresh mortgage elsewhere.
What about adding or reducing borrowing?
Two common scenarios where people assume ERC applies but it often doesn’t:
- Further advance with the same lender — borrowing more against your current property. The existing balance stays on its current rate, the extra borrowing takes a new product. No ERC on the existing balance, because it’s not being redeemed.
- Transfer of equity (taking someone off the deeds) — if the mortgage just continues in a different name set, there’s no redemption. Many lenders waive or pro-rata the ERC on divorce-related transfers.
The misconception worth clearing up
“My ERC is charged on the new loan.” No — the ERC percentage is applied to the outstanding balance of your current mortgage at the point you redeem or overpay. If you’re 3 years into a 5-year fix with a £230,000 balance and year-3 ERC of 3%, the charge is 3% of £230,000 = £6,900, regardless of what your new mortgage looks like. Always check the exact percentage and reset date in the KFI (Key Facts Illustration) of your mortgage offer — they vary lender-to-lender. Our remortgage guide walks through the scenarios in detail.
This is information, not regulated advice — your mortgage offer letter is the definitive source for your specific ERC terms.
Sources
Information, not regulated advice. Mortgage Notes is not an FCA-authorised mortgage adviser. For a recommendation on your specific circumstances, speak to an FCA-authorised broker.