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What are Equity Release Early Repayment Charges (ERC)?

Elderly couple sitting on bench in park, contemplating equity release and early repayment charges

Are you interested in an equity release Lifetime Mortgage but concerned about potential penalties? It is important to consider that if you want to pay back your Lifetime Mortgage early, you may be subject to Early Repayment Charges (ERC).

What are Early Repayment Charges (ERC)?

For most borrowers, Lifetime Mortgages are for life and are repaid on either the sale of the property, entering long-term care or death (of the surviving partner for joint applications). However, if your circumstances change, you may find yourself wanting to repay your mortgage before any of the above scenarios occur.

In this case, depending on the type of Lifetime Mortgage you opt for, ERCs will apply. ERCs are calculated based on the initial loan amount, the length of time the Lifetime Mortgage has been in place and any changes in long-term interest rates. Both fixed early repayment and variable rate structures are available on the market.

Thankfully, many Lifetime Mortgage products on the market offer fixed ERC periods that are as short as eight years, meaning that you may be able to access a 0% charge if you pay your Lifetime Mortgage off at the end of that period.

Elderly hand signing equity release document which stipulates early repayment charges

What if I want to move home? Do charges apply?

You can move home with a Lifetime Mortgage at any time, however, the terms and conditions in relation to moving home vary between lenders. As part of our service at North East Equity Release, we can look for a Lifetime Mortgage product that has downsizing protection. A downsizing clause means that you can move to a less valuable home and pay off some of your loan without being subject to ERCs. 

Am I able to repay part of my Lifetime Mortgage early without a charge?

Since March 2022, all Equity Release Council-approved providers must allow Lifetime Mortgage customers to make penalty-free partial repayments. This will reduce the amount you owe on both the loan and the interest. You can stop making payments at any time.  

Chat with Joanne, your local equity release adviser, today!

As the name suggests, Lifetime Mortgages are designed to last for the remainder of your lifetime and therefore paying off the debt early can incur charges. You should always discuss your circumstances with a professional before securing a loan against your home.

Joanne can talk you through all the options available to you and if a Lifetime Mortgage is suitable, she can help you find a product that has a short ERC period and clauses that suit you and your future plans.