Return to the Mortgage Glossary Home to view explanations for all mortgage terms. What follows is the definition for the term Redemption Penalty as it relates to mortgages in the UK. Redemption PenaltyMortgage providers often have special offers to encourage people to take out a mortgage with them, and these are usually in the form of short-term introductory benefits on your mortgage. These benefits might be a discounted rate, a fixed rate, or a capped rate for a number of months or years. Because these are effectively being offered to you at a loss to the mortgage provider, they rely upon you remaining with that mortgage provider for a long time. As such, these types of mortgage will often have some sort of redemption penalty. This means that if you want to pay off your mortgage early, or move it to another mortgage provider, you will have to pay a redemption penalty. This penalty is normally payable at any time during your introductory offer, and after that time you can move or pay off your mortgage, without incurring a penalty. If the redemption penalty is applicable after the end of your introductory period, this can be referred to as redemption overhang.
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