Early Repayment Charges differ from one lender to another; typically based on a percentage of the borrowed loan amount, and dependent on how much time there is left, during the initial offer period.
As such, the larger the borrowed amount, the larger the ERC.
For example, a two year mortgage, might say have a 2% penalty if there are one to two years remaining. Whereas, it might only have a one percent penalty if there is less than one year remaining.
Typically, the longer the mortgage offer period, the higher the penalty. So, for example, a five-year deal, may have a five percent penalty, or more, during its first year.
In practice, this means that by repaying a mortgage, either by selling the property, or via re-mortgaging to another provider, then as well as having to repay the borrowed amount, you could incur this additional cost - the ERC.
It is often a large amount, running into the thousands of pounds. For example, a 2% ERC on a £200,000 mortgage loan could cost £4,000.
Whereas, a 5% ERC on a £400,000 mortgage could cost £20,000.
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CheckMyFile.com
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Check your credit file before applying, whether you're a first-time buyer or remortgaging. CheckMyFile provides the data used by the three main credit reference agencies - the same agencies that lenders use to check your score. It includes Equifax, Experian, and Transunion.
They offer a 30-day free trial, after which it becomes £14.99 a month. You can cancel at any time. We recommend you subscribe, download your file, then cancel your subscription.
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Your home (or property) may be repossessed if you do not keep up repayments on your mortgage.
These videos are not intended to provide professional mortgage advice and should not be relied upon or regarded as a substitute for such advice. The information contained within each video is for illustrative and information only. Information is aimed at UK consumers only. We recommend that you seek advice from a qualified professional mortgage advisor before acting on any information or other content appearing within these videos.
