Redemption Penalties
Redemption penalties are charges paid to the lender in compensation for lost interest if you pay off your mortgage early.
During a discount period you will be severely penalised if you try to switch to another product or mortgage provider. Penalties can be stepped just like discounts, and can be particularly severe within the first year. This is to ensure that the costs that the lender endures in setting up the mortgage are always covered.
The fee may be equivalent to a certain number of months' interest, or it could be a percentage of the loan. Penalties can be a fixed sum of money, though are often proportion of the loan. With cashback mortgages, you often have to repay the amount of money you received as cash-back.
If you think you may want to repay early, check what conditions apply before you decide which type of mortgage you want.
Click for more mortgage glossary terms relating to remortgaging.