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Can You Pay Off a Tracker Mortgage Early?

Tracker mortgages have a number of benefits; their interest rate follows the Bank of England’s base rate for one, which can mean significant savings over other types of mortgages if interest rates remain low.

Though typically set for between two and five years before switching to your lender’s Standard Variable Rate, some providers will offer a lifetime tracker mortgage, which will follow the Bank of England base rate for the entire mortgage term.

But what happens if you go for a tracker mortgage and decide later on that you want to pay it off early?

The Early Repayment Charge

If your mortgage has an introductory period – like most tracker mortgages do – you’ll most likely find that it also has what’s called an Early Repayment Charge, or ERC.

Typically, the value of the ERC is dependent upon how much of the mortgage loan is yet to be repaid, as it’s usually calculated as a percentage of that figure. That means that if you pay your mortgage off after five years instead of twenty, you’ll most likely have to pay a higher ERC.

Often, the longer your introductory period, the larger your ERC will be too.

Not every tracker mortgage will have an ERC, though most do – so if you’re intending to pay your mortgage off early, it’s worth checking the agreement with your lender to avoid a nasty surprise. ERCs also apply if you wish to remortgage your house with a different lender.

Unsure about which type of mortgage is right for you? Or perhaps you’re interested in a tracker mortgage and would like a helping hand to find a deal that ticks all your boxes? If you fall into either of these categories, contact us today for a free initial consultation from Derngate Wealth Management.

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