Early repayment charges when you sell your house

An early repayment charge (ERC) is a fee your mortgage lender can charge if you pay off your mortgage during a fixed-rate or other introductory deal. Selling your home pays off the mortgage, so if you sell part way through a deal, you'll usually pay the charge out of the sale money on completion day. MoneyHelper says ERCs are usually 1% to 5% of the outstanding balance, though some deals charge a flat fee instead.

On a typical mortgage that can mean several thousand pounds, so it's worth checking your charge before you agree a sale. This guide explains how ERCs work, how to find yours, and the ways to reduce or avoid one.

What is an early repayment charge?

When you take a mortgage deal, such as a two or five-year fixed rate, you agree to keep it for that period. An ERC is the lender's charge for ending it early. It's set out in your mortgage offer, so it isn't a hidden fee, but it's easy to forget years later.

ERCs apply when you:

• sell your home and pay off the mortgage
• remortgage to another lender during the deal
• overpay more than your deal allows in a year

Which? says ERCs are common on fixed-rate mortgages, while some tracker mortgages don't have one. Once your deal ends and you move to the lender's standard variable rate, you're usually no longer subject to an ERC.

How much is an early repayment charge?

Most ERCs are a percentage of the balance you owe when you repay. MoneyHelper says they're usually between 1% and 5%. Many step down each year: Which? says a five-year fix often starts at around 5% in year one and falls by 1% a year after that.

Here's how that pattern looks on a £150,000 balance. For simplicity, the balance stays the same; in reality it falls as you make payments, so the charge would be a little lower.

When you repay	Example charge	On £150,000
Year 1	5%	£7,500
Year 2	4%	£6,000
Year 3	3%	£4,500
Year 4	2%	£3,000
Year 5	1%	£1,500

Your own deal may work differently, and some deals charge a flat fee instead of a percentage, so check your mortgage offer.

How to find out your early repayment charge

1. Check your mortgage offer. It sets out the charge, how it's worked out and when the deal ends.
2. Look at your annual statement, which often shows the current charge and your balance.
3. Ask your lender for a redemption statement. This shows exactly what you'd need to pay to clear the mortgage on a given date, including interest up to that day, any ERC and any exit fee. Your solicitor will ask for one before completion anyway, but getting it early avoids surprises.
4. Check for an exit fee. Which? says you should budget for a mortgage exit fee, which is an administration charge for closing the account, separate from any ERC.

GOV.UK's guide to preparing to sell suggests checking for early repayment charges, and any fees to move your mortgage, before you put your home on the market. Our house sale proceeds calculator shows what you'd walk away with once the ERC and other costs are paid.

How to avoid or reduce an early repayment charge

Time your completion

If your deal ends soon, it may be worth agreeing a completion date with your buyer for just after it ends. Which? says once you're out of the fixed-rate period, you're no longer subject to an ERC. Check the exact end date with your lender, because completing before it could still trigger the charge.

Weigh the saving against the risk of a longer wait. A buyer might not be willing to wait, and you'll keep paying the mortgage and bills in the meantime.

Port your mortgage

Porting means taking your current deal with you to your next home. Which? says most mortgages are portable, and porting is relatively simple if you're moving somewhere similar in price or cheaper. But:

• you have to reapply, and the lender will use its current lending rules, so if your circumstances have changed you might not qualify
• if you need to borrow more, the extra may be on a different product and rate, possibly with an arrangement fee
• even moving somewhere cheaper may involve fees, such as for a valuation
• if you're not buying another home, for example because you're moving into rented housing or with family, there's nothing to port the mortgage to

If there'll be a gap between selling and buying, ask your lender whether you can still port, and how long they'll allow.

Use your overpayment allowance

Which? says most fixed-rate mortgages let you overpay up to 10% of the balance each year without a charge. If your ERC is a percentage of the balance, overpaying within your allowance before you sell reduces the amount it's worked out on. Ask your lender to confirm how this works on your deal.

Is it worth paying the charge to sell now?

Sometimes, yes. An ERC is only one cost, and waiting has costs too. Compare:

• the ERC on your redemption statement, against
• the cost of waiting: extra months of mortgage payments, council tax, insurance and bills, plus the risk of your buyer or your next home falling through

Here's a simple example with made-up figures. Your ERC is £3,000 and your deal ends in three months. If you've already moved out and the empty house costs you £600 a month in mortgage interest, council tax, insurance and bills, waiting saves £3,000 but costs £1,800, so the real saving is about £1,200. That may still be worth it, unless waiting means losing your buyer. Our empty house costs calculator helps you put a figure on the monthly cost.

If you're selling because of a job move, a relationship ending, an inheritance or money pressure, paying the charge to sell now can be the right call. If you have no deadline, timing the sale for after your deal ends may save thousands.

Early repayment charges and a quick sale

An ERC applies whoever buys your home. Selling to a cash buyer, an investor or someone with a mortgage makes no difference to the charge. What can help is control over the completion date.

If you sell to us, you choose the completion date, so you can set it for after your deal ends if that suits you. Keep in mind that cash buyers, including us, usually pay below market value. If your home is in good condition and you have time, an estate agent sale will usually get a higher price, and the ERC alone isn't a reason to accept a lower one. Our cash offer vs estate agent calculator compares both routes with your own numbers.

If you're struggling with mortgage payments

If you're thinking of selling because you can't keep up with payments, speak to your lender first, as early as you can, and ask what help they can offer. Free, independent advice is available from MoneyHelper, Citizens Advice, StepChange, National Debtline and Shelter. Our guide to selling a house with mortgage arrears explains the options in more detail.

Checklist before you agree a sale

• Find your deal's end date and the current ERC.
• Ask your lender for a redemption statement for your likely completion date.
• Check for an exit fee.
• Ask whether you can port the mortgage, and how long you'd have to buy again.
• Work out whether waiting for the deal to end is worth it.
• Add the charge to your figures before you accept an offer.