Early Repayment Cost Calculator

An early repayment charge (ERC, sometimes called a prepayment penalty in the US, or break costs in Australia) is a fee a lender charges for paying off a loan or mortgage ahead of schedule. Common ranges run 1-5% of the outstanding balance, often stepping down each year of the deal. The trade-off this calculator illustrates is direct: the ERC is a one-off cost; paying off early avoids future interest. Whether the math nets positive depends on how much interest is saved relative to the charge.

How to use it

Enter the outstanding loan balance, the ERC percentage from the loan paperwork, the months remaining on the current fixed or discount deal, and the monthly interest saved by paying off early. Adjust any input and the figures recalculate instantly. The currency selector at the top of the calculator changes formatting throughout — the math itself is currency-neutral, so the same ratios produce the same net.

How the math works

ERC cost = balance × ERC%. Interest saved = monthly saving × months remaining. Net benefit = interest saved − ERC cost. Break-even months = ERC cost ÷ monthly saving — that is, how many months of saved interest are needed before the ERC pays for itself. The working is transparent and visible in the formula section below.

Worked example

Picture a 150,000-unit balance with a 3% ERC, 24 months remaining on the deal, and 200 saved each month by paying off (currency follows the selector). The ERC costs 150,000 × 3% = 4,500. The interest saved over 24 months is 200 × 24 = 4,800. Net is 4,800 − 4,500 = 300 — paying off early just about pays for itself. Break-even arrives at month 22.50 (4,500 ÷ 200), so the saving only meaningfully accumulates in the closing months of the deal. With 12 months left instead of 24, the same inputs would flip net to a loss because the saved interest no longer covers the charge.

When the math tends to favour paying off

The net benefit tends to come out positive in the closing months of the ERC period, where the charge has stepped down and the months remaining are too few for the difference to compound much. It tends to come out negative early in a multi-year fixed where the ERC is still at its highest and many months of saved interest would be needed. Refinancing to a substantially lower rate can shift the picture by raising monthly interest saved enough to cover the ERC.

Common ways to avoid the charge entirely

Several routes side-step the ERC rather than paying through it. Porting the existing mortgage to a new property when moving (most lenders allow this); using the annual penalty-free overpayment allowance many lenders offer (often documented as up to 10% of balance per year without ERC, per typical lender disclosure rules; specifics vary by lender and jurisdiction); refinancing to a different product from the same lender (some lenders waive the ERC in that case). The lender's terms-and-conditions document is the authoritative source for which of these apply to a specific deal.

How to estimate monthly interest saved

Compare the current rate's monthly interest cost against the rate that would replace it. As an illustration, on a 150,000-unit balance at 5% the monthly interest cost is around 625 (5% × 150,000 ÷ 12); at 3.5% it would be around 437.50. The difference, around 187.50, is the monthly interest saved. Most online lender calculators show this comparison directly. The same arithmetic applies in any currency.

What this calculator doesn't capture

The model treats monthly interest saved as constant. In reality, an amortising loan reduces interest over time as principal falls, so the late months would save less than this average suggests. The calculation also doesn't account for fees on the replacement product (arrangement fee, valuation, legal), which can offset some or all of the gain when refinancing. The figure functions as a first-pass estimate and run the numbers separately for any specific replacement deal.