Unless you agree to pay your mortgage lender’s standard variable rate of interest which is expensive and unnecessary your mortgage deal is likely to come with an early redemption penalty attached.
Your lender will make you pay it if you want to get out of the deal before the agreed end date whether it’s because you want to move to a cheaper lender or you’ve come into the money to clear your mortgage entirely.
Why do they apply a penalty?
Lenders use these penalties to tie you to them, so your payments continue to boost their profits.
And it works because they set them high enough so that most people would rather stay put than pay up.
How long will it last?
After that, you will be free to pay off your loan without penalty.
This could last for several years after the cheap deal has ended, tying you to the lender’s far higher standard variable rate.
How much will it be?
The early redemption penalty might be several months interest or a percentage of your loan. Either way, it could cost you several thousand pounds.
Can I avoid it?
Yes. To find out how, read How to avoid paying an early redemption penalty.
You might also want to read about higher-lending fees: See Higher-lending fees explained.