How to Avoid Early Repayment Charges

Wait Until Your Deal Period Ends

The most straightforward way to avoid an early repayment charge is simply to wait until your current mortgage deal expires. Once you reach the end of your fixed, tracker or discounted rate period, you're free to remortgage without any penalty.

Most mortgage brokers recommend starting the remortgage process around three to six months before your deal ends. This gives you enough time to compare rates, apply and complete the legal work without ever moving onto your lender's standard variable rate (SVR), which is almost always more expensive.

Many lenders will let you lock in a new rate up to six months in advance, so you can secure a competitive deal well ahead of time while still avoiding any ERC on your current mortgage.

Use Your Overpayment Allowance

Most mortgage deals allow you to overpay up to 10% of your outstanding balance each year without incurring an early repayment charge. This can be a powerful tool for reducing your mortgage faster without triggering penalties.

For example, on a £200,000 mortgage, you could overpay up to £20,000 per year without any charge. If you receive a bonus, inheritance or other lump sum, making overpayments within this limit lets you reduce your balance and the total interest you'll pay over the life of the mortgage.

Check your mortgage terms carefully, as the overpayment allowance varies between lenders. Some calculate it on the original balance, others on the current balance, and some use an anniversary date rather than a calendar year. Going even slightly over the limit can trigger an ERC on the excess amount.

Choose a Mortgage Without ERCs

If flexibility is important to you, consider choosing a mortgage that doesn't carry early repayment charges. Some tracker mortgages and variable rate deals come without ERCs, giving you the freedom to switch or overpay at any time.

The trade-off is that these products may have slightly higher interest rates than equivalent deals with ERCs attached. However, the flexibility they offer can be valuable if your circumstances are likely to change, for example if you're planning to sell your home, expecting a large inheritance, or unsure about your long-term plans.

It's also worth noting that once you move onto your lender's SVR after your deal period ends, there's typically no ERC. This means you can remortgage at any point while on the SVR, though you'll want to do so quickly as SVRs tend to be significantly more expensive than fixed or tracker rates.

Port Your Mortgage When Moving Home

If you're moving house during your deal period, porting your mortgage lets you transfer your existing deal to the new property. This can help you avoid the early repayment charge that would otherwise apply when you repay your current mortgage on completion of the sale.

Porting isn't guaranteed, as your lender will reassess your affordability and the new property's suitability. If you need to borrow more than your current mortgage balance, you'll usually take a second portion at the lender's current rates, while keeping your existing deal on the original amount.

Not all mortgages are portable, so check your terms before relying on this option. Even where porting is available, the process can be complex, so working with a broker can help ensure everything runs smoothly.