What is an early repayment charge?

If you want to pay off your mortgage early, there are a few options. You can sell your home, switch to a better deal, or make extra payments. In this situation, knowing about early repayment charges (ERCs) is important.

In this guide, we will explain when ERCs apply and how they work. We will also show you how to manage your mortgage. This way, you can stay in control of your repayments and avoid unexpected costs.

What are early repayment charges?

ERCs are fees that lenders ask for if you repay your mortgage early—either fully or in part before the agreed period ends. These charges pop up most often during:

• Fixed‑rate deals: when your interest rate stays the same
• Tracker deals: when your rate follows the Bank of England’s rate
• Discounted periods: temporary lower rates

When do early repayment charges apply?

Lenders add ERCs to protect their expected earnings. You'll usually meet one of these scenarios:

Selling your home

If you sell during the fixed-rate deal to move your home, you’ll likely pay ERCs so the lender isn’t losing the interest they thought they’d get.

Switching or re‑mortgaging early

You may have to pay early repayment charges if you switch to a new deal or lender too soon.

Overpaying

Many mortgage products may let you pay up to 10% extra each year without penalty. If you exceed that limit, you typically incur an additional charge. However, some lenders like Central Trust don’t have minimum or maximum amount permitted on overpayments.

Can I avoid early repayment charges?

Yes, you can avoid ERCs in three ways:

• Choose a mortgage with no ERCs.
• Time your repayment or re-mortgage in line with when your fixed rate/tracker mortgages end.
• Stay within your annual overpayment allowance.

Can you get a mortgage with no early repayment charges?

Yes, you can. No ERCs mean customers can leave their mortgage deal without facing early exit penalties. Mortgage without ERCs lets you:

• Pay off your mortgage early, for example, if you sell your property or get extra money.
• Re-mortgage to a better deal or move to another lender at any time during the fixed period.

How ERCs and overpayments work with Central Trust products?

Can I overpay my mortgage?

At Central Trust, you can overpay your mortgage. We allow overpayments even for fixed-rate mortgages without charging a penalty.

• No minimum or maximum amount is permitted on overpayments.
• All of our products allow customers to make overpayments at any time and without penalty.
• Customers can choose to either reduce their term which helps reduce the interest cost or reduce their monthly payment.

How do early repayment charges work?

We calculate early repayment charges based on the initial net loan borrowed. Plus, we charge a release fee of £150 on all our products including the No ERCs product plan. 

For example, if a customer took a £50,000 loan for 5 years and paid it off in year 3, they would pay the following: 

£50,000 x 3% = £1500 plus £150 release fee = £1650

Conclusion

Understanding how early repayment charges work is an important part of managing your mortgage. ERCs safeguard lenders against interest loss. However, with careful planning, you can avoid paying them. This can save you money and give you more flexibility with your repayments.

If you want to pay off your mortgage early, switch deals, or make extra payments, check your mortgage terms first. Look for options that offer flexibility, such as products with no ERCs or generous overpayment allowances.

At Central Trust, we offer products that give our customers more control with no limits on overpayments. Our fees are clear and transparent. Contact us free of charge 0800 980 6273, or complete our enquiry form, and we will return your call at a convenient time.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON YOUR HOME, THE LENDER MAY REPOSSESS IT.