What Is a Mortgage Exit Fee?

As the name suggests, you could incur a mortgage exit fee when you reach the end of the loan’s original term, repay all of your mortgage early, or remortgage with a different lender.

Depending on which lender you’re with, it can be referred to by various names: discharge fee, repayment administration fee, closure fee, or deeds release fee, to name a few. Whatever title it’s given, a mortgage exit fee is a payment which covers all of the administration costs incurred for closing your mortgage account.

For example, let’s say you’ve been steadily making overpayments on your mortgage within the agreed limits (usually 10% to 20%) and have repaid the outstanding loan before the end of the original term. A mortgage exit fee may now be charged before the lender closes the account and releases the property’s title deeds to you.

How much do mortgage exit fees cost?

The costs vary from lender to lender. Some lenders – HSBC and Halifax, for example – don’t include an exit fee on any new applications. It’s also possible for lenders to include this fee at the start of your loan, often referred to as an ‘account fee’ on the charges tariff, rather than at the end.

If you’re considering remortgaging during the term of your loan, be sure to consider the impact any exit fees may have when switching providers. For instance, if your current lender has a low exit fee, the lower repayments available with another lender might outweigh the charge.

Is a mortgage exit fee the same as an early redemption charge?

No, they’re both separate charges. An early redemption charge (ERC) usually applies if you decide to come out of a specific interest rate deal (fixed rate, discounted or tracker) with your existing mortgage lender before the agreed term.

Typically, ERCs are charged as a percentage of the mortgage loan, ranging from 1% to 5%. They can also be incurred if you make overpayments above the agreed allowance.

Let’s say you have a £150,000 mortgage on a 5-year fixed rate deal with an ERC of 2%. If you want to remortgage with another lender after 3 years, you will be charged £3,000 for switching before the agreed term ends. If your current lender also has a mortgage exit fee of £100, the total cost would be £3,100 if you proceed.

In this example, fees like the ERC and mortgage exit fees can vary depending on your lender’s terms. It’s essential to check the specifics of your mortgage agreement, as some lenders apply a sliding scale for ERCs, where the percentage decreases over time. Additionally, not all lenders apply mortgage exit fees in every situation.

As with exit fees, not all lenders impose early redemption charges on every mortgage deal. Make sure you review the charging tariffs of each lender with your broker so you understand how and when all fees may apply before submitting your mortgage application.