Full repayment and overpayments are different
Full repayment clears the loan and closes the borrowing account. Lenders often call this redemption. You might use savings, proceeds from selling your home or money from a replacement mortgage.
An overpayment is an extra payment towards the loan while the account stays open. This could be a single lump sum or additional money paid regularly.
The distinction matters because a lender can permit overpayments without a charge while applying a charge for full redemption. Pepper Money's homeowner loan guidance provides an example of this difference, although your own agreement determines your terms.2
Clearing a second charge mortgage does not clear your separate first mortgage. Keep the two accounts and their payment instructions distinct.
What might be included in your settlement figure?
Ask your lender for a redemption statement for the date you intend to repay. This sets out the amount needed to settle, including the relevant interest and fees.3
| Item | What it means |
|---|---|
| Outstanding balance | The amount still owed on the account, including any financed fees remaining within it |
| Accrued interest | Interest due up to the settlement date |
| Early repayment charge | A charge triggered by repayment during a period specified in the agreement |
| Exit or discharge fee | A separate charge that may cover closing the account or releasing the lender's security |
| Other amounts due | Any additional sums properly due under the agreement and shown in the breakdown |
An exit fee and an early repayment charge are separate items. Having no early repayment charge does not automatically mean that closing the account is free.4
Check whether any charge or interest amount is already included in the stated balance. Adding it again would overstate what you owe.
How do early repayment charges work?
An early repayment charge, often shortened to ERC, applies according to the mortgage terms. Check the charge itself, the amount it applies to and the dates when it reduces or ends.
A charge might apply when you settle the whole loan or make an overpayment beyond a permitted limit. The charging period can sometimes extend beyond an initial fixed or discounted rate period.5
For regulated mortgage contracts, FCA rules require an ERC to be capable of being expressed as a cash amount and to reflect a reasonable estimate of the lender's costs from early repayment. This does not create one standard charge for every borrower.6
Ask the lender to confirm your actual charge in pounds. Do not rely on a general online example or assume a percentage applies to the original loan amount.
Can you overpay a secured loan without a charge?
Possibly, but there is no universal allowance for every secured loan. Some agreements permit extra payments without an ERC, while others set limits. Full redemption can have different conditions.2
Before arranging an overpayment, ask:
- How much can I pay without a charge?
- Which balance is used to calculate any allowance?
- When does the allowance reset?
- Do regular extra payments and lump sums use the same allowance?
- What happens if I repay the remaining balance soon afterwards?
Do not assume an allowance resets each January or that unused amounts carry forward. Get the rule for your account in writing.
Also ask how the payment will be applied. Will the lender reduce your future monthly payment, shorten the repayment period, or require an instruction from you? Understanding the outcome matters as much as transferring the money.
Keep making the contractual payments unless the lender confirms a change.
How to pay off a secured loan early
1. Find the relevant documents
Locate your mortgage offer, current balance information and tariff of charges. Note any ERC dates and the lender's process for requesting settlement information.
If documents appear inconsistent, ask the lender to explain which terms apply before proceeding.
2. Request a figure for the intended payment date
Give the lender a realistic settlement date. Under the applicable mortgage disclosure rules, it must provide information without delay to help you assess early repayment, including the financial implications and assumptions used.7
Ask how long the quoted figure remains usable and what happens if payment arrives earlier or later.
3. Check the breakdown and payment instructions
A redemption statement may show daily interest as well as the balance and fees.3 Check whether the calculation assumes another monthly payment will be collected before settlement.
Use payment details confirmed through the lender's established contact channel. Ask what reference to use and when cleared funds must arrive.
4. Confirm completion of the repayment
Ask for written confirmation that the debt has been settled and what happens next to the security over the property.
Check with the lender before cancelling the Direct Debit. If a sale or remortgage is involved, coordinate with the solicitor handling completion so payments are not duplicated.
Is it cheaper to repay now or wait?
Repaying early reduces the period over which interest builds up. However, an ERC can reduce the saving, and using all your available cash can leave you short for essential expenses. MoneyHelper recommends considering other debts, savings and your financial buffer before overpaying a mortgage.8
There are three useful options to compare:
| Option | What to assess |
|---|---|
| Settle in full now | Current settlement figure, charges and the cash left afterwards |
| Make a partial overpayment | Any charge, the effect on future repayments and cash retained |
| Wait until a specified date | Interest while waiting, any change in the ERC and what happens to your rate |
Ask for a current settlement figure and an explanation of how the charge would change on your proposed later date.
Be careful when comparing monthly payments. Part of each repayment may reduce the principal, which is the amount borrowed. That part is not an extra borrowing cost. A useful comparison accounts for the payments made and the balance left to clear at the same point in time.
If you would keep the money in savings while waiting, include the interest you would actually retain after any tax. Avoid treating an uncertain investment return as guaranteed money available for settlement.
If the relevant date is close, obtain written confirmation of the first date repayment can arrive without the charge. Do not assume that initiating a transfer before that date will be treated as payment afterwards.
What if you are repaying through a new mortgage?
Replacing a secured loan with a remortgage or another secured loan is new borrowing. The original account may close, but the debt has moved into another agreement.
Compare the cost of leaving your existing borrowing with the costs of the replacement. Relevant items can include the ERC, lender and broker fees, legal costs and interest on fees added to the new balance.9
A lower monthly payment may result from stretching repayment over more years. Ask for a comparison using a similar remaining repayment period, as well as the term proposed.
Where your first mortgage will also be replaced, include its settlement costs. An attractive rate on the new mortgage does not establish a saving across the whole transaction.
Do older secured loans have different settlement rules?
They can. FCA guidance confirms that the Consumer Credit (Early Settlement) Regulations 2004 continue to apply to second charge regulated mortgage contracts entered into before 21 March 2016 and to legacy CCA mortgage contracts.6
If your agreement is older, ask the lender which rules apply and request its calculation. Do not assume a settlement formula found in an unsecured loan guide applies to your mortgage.
The date and type of agreement matter more than the product being described simply as a “secured loan”.
What if you think the charge is wrong?
Ask the lender to explain the calculation and identify the relevant contract terms. Keep the offer, redemption statement and any messages about the charge.
If the issue remains unresolved, make a formal complaint to the lender. For most complaints, it has eight weeks to provide a final response. An eligible complaint can then go to the Financial Ombudsman Service if you are unhappy, or if the response deadline passes without a final response.5
A refund is not automatic. The Ombudsman considers the agreement, disclosures, calculation and circumstances.
Check repayment flexibility before borrowing
If you expect an inheritance, a property sale or another lump sum, tell the adviser when comparing loans. Ask what settling at that point would involve, while allowing for plans to change.
Habitat Loans introduces customers to Loans Warehouse for mortgage advice and arranging services. For a loan you already hold, request settlement information from your existing lender.
A clear answer should tell you the amount to pay, the date it covers and the costs attached to your decision.
For loans secured against your home. Introduction to Loans Warehouse. Subject to status and lender criteria. Broker and lender fees may apply.
Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
References
Research checked on 17 September 2026. Scope is ordinary regulated residential second charge mortgages, with a specific caveat for older agreements. Lender examples establish that terms differ; they are not universal conditions or recommendations. The comparison questions and practical sequence are original editorial guidance.
- FCA Handbook: MCOB 2A.4 Early repayment. Right to full or partial early repayment for MCD regulated mortgage contracts, reduction of future interest and costs, and permitted ERCs.
- Pepper Money: Homeowner loans FAQs. An example of a second charge lender permitting overpayments while full redemption may attract an ERC. Terms must be checked for the individual agreement.
- Pepper Money: Where can I get a redemption statement?. Statements include the balance, interest, daily interest information and applicable tariff charges. The lender's general description supports the components, not a universal processing time or validity period.
- MoneyHelper: Mortgage fees and costs. Mortgage exit fees, ERCs and interest on financed fees. No home purchase fee amounts have been transferred to secured loans.
- Financial Ombudsman Service: Early repayment charges. ERC triggers and charging periods, complaints process and the Ombudsman's assessment. Most complaints require a final response within eight weeks.
- FCA Handbook: MCOB 12.3 Early repayment charges. Cash value and reasonable cost estimate requirements. MCOB 12.3.5 explains continued early settlement regulations for second charge mortgages entered into before 21 March 2016 and legacy CCA mortgage contracts.
- FCA Handbook: MCOB 7A.3 Early repayment disclosure. Information without delay when the borrower wants to discharge an MCD regulated mortgage before expiry, quantified implications and reasonable assumptions.
- MoneyHelper: Should you pay off your mortgage early?. Interest savings, charges, other debts, savings and retaining a cash reserve. No universal overpayment percentage or individual savings recommendation is implied.
- MoneyHelper: Remortgaging to get the best deal. Comparing replacement borrowing with existing arrangements, ERCs and other switching costs.