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. The same charge applies if you clear the whole loan or switch to another lender before the fix ends. ERCs usually range from 1–5% of the amount repaid early, declining year by year through the fixed term. On a typical 5-year fix the taper runs 5% in year 1, 4% in year 2, 3% in year 3, 2% in year 4 and 1% in year 5. On a £200k mortgage with 3 years remaining and a 3% ERC, full repayment costs £6,000. Your mortgage offer sets out the exact structure, and it is worth checking before you assume anything.

The break-even calculation compares two routes: paying the ERC now and clearing the mortgage or switching to a cheaper rate, or continuing regular payments until the end of the fix and then remortgaging. If the interest saved by acting now exceeds the ERC, early repayment makes financial sense. Take a £200k mortgage at 6% with 18 months left on the fix and a 4% deal available. The ERC at 3% is £6,000. A 2% rate saving on £200k is £4,000 a year, which over 1.5 years comes to £6,000, so the switch roughly breaks even on the rate alone, and the lower payments on the new 5-year deal carry on beyond that point. As a rule of thumb, switching with an ERC pays off if rates have moved 2% or more in your favour.

Lenders work out the charge in one of two ways. Many apply the percentage only to the amount being repaid early, which matters for partial overpayments: paying off £50,000 of a £200,000 mortgage at a 3% ERC costs £1,500. Others take a percentage of the whole outstanding balance, so 3% of £200,000 is £6,000 however much you actually repay. Some lenders also add a deeds release fee of £100-£200 when you redeem in full. The ESIS (European Standardised Information Sheet) you get with the mortgage offer states which method applies and lists any extra fees, so read it before signing.

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, whereas investment returns are not, and that certainty has a value of its own for anyone who dislikes seeing a balance fluctuate.

There are several ways to avoid the charge altogether. Some lenders offer porting, which lets you keep your existing mortgage rate when moving home with no ERC. Most allow a 10% annual overpayment without penalty. ERCs do not apply once you are on the lender's SVR (Standard Variable Rate), and drop-lock mortgages allow you to switch to a fixed rate mid-tracker without a charge. Bereavement or genuine financial hardship can sometimes persuade a lender to waive an ERC, though lenders are under no obligation to agree. Timing a remortgage to complete just after the fix expires gives an ERC-free switch.

To run the comparison, enter the outstanding balance, the current rate, the remaining term, the ERC percentage and how many years the ERC still applies. The calculator turns the ERC into a cash figure, works out the interest still to pay if you keep the mortgage to the end of its term, and nets one against the other so you can see whether clearing it now leaves you ahead, and by how much.