Early repayment charge when moving house: how to avoid it

An early repayment charge when moving house is a fee your mortgage lender can apply if you pay off your mortgage before your current deal ends. It catches out plenty of movers who assume that selling their home is automatically a clean break from their existing lender. If you're comparing your moving home mortgage options, understanding how ERCs work is one of the first things worth getting straight.

In plain terms, an ERC is a percentage-based fee charged on the amount you repay early. Lenders usually structure it on a sliding scale - the fee is highest in the early years of your deal and tapers down as you get closer to the end. It only applies during your initial fixed or tracker period, not for the rest of your mortgage term.

Key facts about ERCs

• ERCs typically range from around 1% to 5% of the amount repaid, depending on how long you have left on your deal
• The charge tapers down each year - for example, a higher percentage in year one, falling towards the end of the deal
• ERCs only apply during your initial deal period, not for the full mortgage term
• Some mortgages, particularly standard variable rate deals, don't carry an ERC at all

Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it, so it's worth checking your mortgage offer document or annual statement for your exact ERC rate and the dates it applies before you make any decisions about moving.

Whether you pay an early repayment charge when you move depends on what happens to your existing mortgage during the move, not simply on the fact that you're selling. What we see most often is one of three scenarios play out.

If you sell and buy on the same day and transfer your existing deal across, you typically avoid the charge entirely. If there's a delay between the two, or you decide not to carry your deal forward, an ERC is more likely to apply.

The same principle applies if you're a landlord selling a buy-to-let property funded by a mortgage with an ERC attached. Most buy-to-let mortgages aren't regulated by the Financial Conduct Authority in the same way as residential mortgages, so terms and porting rules can vary more between lenders - it's worth checking your specific tariff.

ERCs are calculated as a percentage of the amount you repay, and because they're applied to your outstanding mortgage balance, the numbers can add up quickly. On an average-sized UK mortgage, an ERC can easily run into five figures.

The table below shows how the same charge structure can produce very different costs depending on your balance and where you are in your deal. These figures are illustrative only - your actual ERC rate and structure will be set out in your original mortgage offer document, so always check the specific tariff with your lender.

ERCs are just one of several costs of moving house to plan for, alongside stamp duty land tax, legal fees, and removal costs. Building an accurate picture of your ERC exposure before you commit to a moving date can help you budget realistically for the whole process.

For most homeowners, porting a mortgage when moving house is the main way to avoid triggering an ERC. Porting means transferring your existing deal, rate and terms across to your new property rather than repaying it and starting again.

Most fixed-rate and tracker mortgages are portable, and lenders must allow you to apply to port under Financial Conduct Authority rules, though they can still decline your application on affordability grounds. Porting isn't a guarantee: your lender will reassess your income, credit history, and the value of the new property as if you were a new applicant.

Since porting involves a full reapplication, it helps to know how long does a mortgage application take before you commit to a completion date, so you can plan your move around it realistically.

What happens if your mortgage port is declined?

Porting isn't guaranteed, and if your circumstances have changed since you took out your original mortgage, your lender can say no. If that happens, you generally have three options:

1. Pay the ERC and remortgage to a new deal - this may still work out worthwhile if a more competitive new rate would save you more over time than the ERC costs.
2. Delay your purchase until your current deal expires - not always practical if you're in a chain, but it avoids the ERC altogether.
3. Speak to an advisor about other lenders - we compare a wide range of lenders, including some who may take a different view of your circumstances than your existing provider.

How an ERC affects you can differ quite a bit depending on whether you're moving to a more expensive home or a cheaper one.

Upsizing (borrowing more)

If you're moving to a more expensive property, you can usually port your existing balance at your existing rate, then take out additional borrowing on a new rate from the same lender to cover the difference. No ERC applies to the ported portion, though it's worth comparing the blended cost across both parts of your mortgage against what a full remortgage might offer once any ERC is factored in.

Downsizing (borrowing less)

If you're moving to a cheaper property, you may only need to port part of your mortgage. The ERC applies to whatever portion you redeem rather than carry forward.

For example, if you have a £200,000 balance but only need £140,000 on your new property, the ERC is charged on the £60,000 you're repaying, not the full amount. This catches a lot of downsizers by surprise, so it's worth asking your lender for the exact figure before you commit to a price on your new home.

Chain delays and last-minute hitches mean that selling and buying a house at the same time doesn't always go to plan. If your sale completes before your purchase, you may end up redeeming your existing mortgage before your new one is in place.

Some lenders charge the ERC immediately in this situation but refund it if your new mortgage completes within a set window, often three to six months. Policies vary significantly by lender - for example, some major lenders, including Halifax and Nationwide, have historically offered refund windows for customers who complete their onward purchase within a set timeframe, though the exact terms and duration can change, so always confirm the current position with your own lender in writing before you exchange contracts.

If the gap looks likely to run longer than your lender's refund window, bridging finance is sometimes used to cover the period between transactions. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it, so if you're considering bridging finance, make sure you fully understand the costs and risks before proceeding, and discuss it with an advisor first.

Sometimes, yes. If switching to a more competitive deal would save you more in interest over the rest of your current fixed term than the ERC costs, paying it can still work out cheaper overall. If the saving is smaller than the ERC, it's usually better to wait until your current deal ends.

As a simple example, if your ERC works out at £7,500 but switching now would save you more than that in interest over the remaining term of your deal, paying it could still leave you better off. If the saving would only be a few hundred pounds, the ERC is unlikely to be worth paying.

When you're doing the sums, also factor in:

• Arrangement or product fees on the new deal
• Broker and legal fees for switching lenders
• Any early exit fees separate from the ERC itself

If working through these numbers on your own feels overwhelming, especially alongside everything else involved in a house move, MoneyHelper (moneyhelper.org.uk, 0800 138 7777) offers free and impartial guidance on managing mortgage costs, and an advisor can run the comparison for your specific circumstances.

If you take away one thing from this guide, it's that most homeowners can reduce or avoid an early repayment charge when moving house with a bit of planning before they list their property. Here's a straightforward checklist to work through.