How much is the early repayment charge if I sell my rental property?
An early repayment charge (ERC) is a fee a lender charges if a mortgage is repaid during its fixed or discounted period. It is usually a percentage of the balance that steps down each year, for example 5% in year one falling to 1% in year five. On a portfolio sale, ERCs across several loans can cost tens of thousands of pounds.
Read more in our guide: Mortgage debt and your portfolio
Example: £150,000 loan on a 5-year fix
| Year repaid | Typical ERC |
|---|---|
| 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 |
| After the fix ends | Usually nil |
How ERCs work
Your mortgage offer sets out the charge, the period it applies and how it is calculated. Most charge a percentage of the amount repaid; some step down monthly. Many allow you to overpay up to 10% of the balance each year without charge. Repaying on completion of a sale counts as early repayment if it falls inside the ERC period.
Ways to reduce the cost
- Time completion for just after the fix ends; your solicitor can work to that date.
- Use the annual overpayment allowance before the sale to cut the balance the charge applies to.
- Port the product to another property, where the lender allows it.
- Sell in a phased sale, starting with properties whose loans are free of charges.
Weighing the charge against the sale
An ERC is a known, one-off cost. Waiting a year to avoid a 2% charge can make sense, but not if rates, tax changes or falling values cost more in the meantime. Compare the charge with the price on offer now and the cost of holding on; the redemption statement gives the exact figure for any date.
Tax treatment
An ERC is a cost of the loan, not of buying or selling the property, so it is generally not deductible for Capital Gains Tax. For rental income it is usually treated as a finance cost, which for individual landlords gets only the basic rate credit under Section 24. Companies can generally deduct it.
Official Sources and Further Reading
General information for landlords in England, checked against official sources in October 2026. It is not tax, legal or financial advice: speak to a qualified accountant or solicitor about your own circumstances.
Frequently Asked Questions
An early repayment charge (ERC) is a fee a lender charges if a mortgage is repaid during its fixed or discounted period. It is usually a percentage of the balance that steps down each year, for example 5% in year one falling to 1% in year five. On a portfolio sale, ERCs across several loans can cost tens of thousands of pounds.
Almost never. Buy-to-let mortgages are personal to the borrower, so they are repaid on completion.
Rarely, though some do in hardship cases or if you take a new product with them.
No. An exit or redemption admin fee is a small fixed charge paid on any repayment; the ERC only applies within the fixed or discounted period.
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