An Early Repayment Charge (ERC) is when you pay back part or all of your mortgage over the limit we specify during your application. This is known as an overpayment threshold.
The amount that you will be charged depends on what product you select. You can take a look at our products here. Any specific product Early Repayment Charges can also be discussed with your mortgage advisor.
Annually, you can overpay up to 10% of your mortgage amount (as a group) with no Early Repayment Charges (ERC) applied. This is different from most lenders, as it allows you to overpay based on your original mortgage amount, rather than the amount you currently owe.
If you were to make a repayment over this threshold, you could be subject to an ERC depending on the mortgage product you have and how much time you have remaining.
For example, if you have a 5 year fixed rate product (the interest rate stays the same for the whole time) and you made a payment over your annual threshold with 4 years left, you would be charged 4% of the amount repaid the threshold. However, if you had 1 year left, you would be charged 1%.
The charge would be applied to the amount you repaid over the 10% threshold. For example, if you repaid £1,000 over the 10% allowance, then the charge would apply to the £1,000, rather than the entire amount repaid.
Please note that an ERC is only applicable during a set product period. Using the example above, the early repayment charges would only apply during the initial 5 year fixed rate period. If you wanted to overpay and clear your mortgage after this, then you could.
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