Glossary of mortgage terms


Additional Features

To help you with the cost of moving home or remortgaging some of our mortgage deals come with additional features such as cashback, free standard legal service or free valuation. These are detailed on the individual pages and factsheets for our mortgage deals.

Collar

A mortgage collar, commonly referred to as a mortgage floor, is the minimum interest rate a variable or tracker rate could fall to.

Early Repayment Charge

The Early Repayment Charge is the fee that we will charge you if you make a repayment of capital over and above your annual overpayment allowance, transfer to another mortgage deal, or repay your mortgage entirely. The Early Repayment Charge Period is detailed in our mortgage factsheets, mortgage illustrations and your mortgage Offer Document.

End date

The end date is the specified date when your initial deal period ends. Unless you pick a new mortgage deal you will usually be transferred to our Standard Variable Rate (SVR), although you should refer to the specific terms of your mortgage to confirm this.

Please note that despite deals referring to a '2 year fixed rate' for example, the rate of interest may last slightly more or slightly less than 2 years depending on the date your mortgage completes and the deal period end date.

Equivalent savings rate

If you have an Offset savings account linked to an Offset mortgage, you do not earn interest on any of your Offset savings. However, by linking your savings to your mortgage, you will only pay interest on the difference between your Offset mortgage balance and Offset savings balance(s). The money in your Offset savings account(s) therefore benefit from the equivalent of the interest rate charged on your Offset mortgage.

The equivalent savings rates differ between individual Offset mortgage deals depending on interest rates and details are provided on the individual pages and factsheets for our mortgage deals. The equivalent savings rate will also depend on your individual tax status.

Estimated Monthly Repayment

An estimated monthly repayment gives you an idea of how much you would pay back each month on a given mortgage deal for a repayment mortgage, using the property value, deposit and loan term details you have provided. The payment includes money to repay the amount you’ve borrowed (the capital), as well as the interest on this sum.

Please note that the figures provided are for illustration purposes only.

Fees

Mortgage fee

Sometimes called a 'redemption fee' this is a fixed amount payable on the redemption of your mortgage loan. Our Mortgage Fee is £90.

Product fee

The Product fee is a fee we charge on selected mortgage deals. The fee is payable in full and the funds must be cleared before we can issue your mortgage Offer. Alternatively you can ask for the fee to be added to your loan, which will increase both the amount you borrow and your monthly repayments.

Higher lending charge

The Higher lending charge is a fee sometimes payable by the borrower to the lender, to cover the higher risk on lending a higher proportion of the value of a property. This fee provides some protection to a lender against the risk of the borrower defaulting under the mortgage, and the lender being unable to sell the property for enough to cover the amount owed.

This fee does not, however, remove or reduce your responsibility as a borrower for repayment of the full mortgage balance.

More information about fees, costs and other charges.

Interest rate

The interest rate is the rate you will pay during the term of the initial mortgage deal.

You will usually be transferred to our Standard Variable Rate (SVR) for the remaining term of the mortgage.

Loan to Value

In simple terms this is the size of your mortgage as a percentage of the value of the property you wish to purchase (or your own property if you are remortgaging).

For example:

Purchase price of £200,000, mortgage of £180,000 + deposit of £20,000

= Loan to Value of 90%.

You may sometimes find that mortgage deals with a lower LTV have a lower interest rate, although this varies from provider to provider.

To determine what your current LTV is, we use the latest valuation of your property that we hold on our records combined with any House Price Index (HPI) changes.

If you believe that the valuation of your property, and therefore the LTV of your mortgage, is incorrect, we can arrange for a new revaluation to take place for a cost of £75. However, please note that this will delay your application and you will not be able to select products with a lower LTV limit until that valuation has been received, and your application will be subject to that valuation figure.

Loan size

Minimum loan amount

The minimum amount we will lend. This depends on the specific mortgage deal you choose. Details of these are displayed on factsheets and individual online mortgage deal pages.

Maximum loan amount

The maximum amount we will lend to a customer. The maximum loan amount depends on the specific mortgage deal you choose. Details of these are displayed on factsheets and individual online mortgage deal pages

Mortgage part(s)

Sometimes your mortgage may be made up of different ‘parts’ – these are separate mortgage deals that combine to make up your total mortgage.

If you are an existing customer and would like to switch to a new mortgage deal, you will need to check which parts of your mortgage are eligible for an Existing Borrower Transfer. When doing this online, we will show you.

Mortgage term

The length of time you take a mortgage out for, usually 20, 25 or 30 years (although this can vary depending on your borrowing requirements). This shouldn’t be confused with a fixed rate period or the initial period, which is usually ashorter time period. If you are an existing mortgage customer, your remaining term is the total length of time before your mortgage is repaid in full.

Mortgage type

Fixed rate mortgage

A Fixed rate mortgage offers the stability of a fixed rate of interest until an agreed date. This means that the interest rate remains the same throughout the term of the mortgage deal, as opposed to other types of mortgage (outlined below) where the rate may adjust.

Tracker mortgage

With a Tracker mortgage, the interest rate is set at a percentage above or below the Bank of England (BoE) base rate. The interest rate payable will rise and fall in line with changes to the BoE base rate. Tracker mortgages include a ''collar'' which is the minimum rate that the interest rate of a tracker mortgage could fall to and a ‘cap’ which is the maximum rate your interest will rise to if there is an increase in the Base Rate.

Offset mortgage

Offset mortgages provide you with the opportunity to use your savings to reduce the cost of your mortgage, meaning that instead of earning interest on your savings you can reduce the amount of interest you pay on your mortgage. This can help to reduce the length of time it takes to repay your mortgage or to lower your monthly payments now or in the future and you retain access to your savings should you need it.

Discounted Standard Variable Rate (SVR) mortgage

A Discounted SVR mortgage is a type of variable rate mortgage that follows our Standard Variable Rate (SVR) at a specified ‘Discount’ for a specific period of time (typically 2 years).

For example, if we offer a mortgage deal with a discount of 3%, the interest rate you would pay would be 1.74% (our SVR, which is currently 4.74% minus the 3% discount).

Our SVR (which is set by us and is independent of the Bank of England Base Rate) can be increased or decreased at any time, which may affect the interest rate of your mortgage and either increase or decrease your monthly repayments. Any changes to SVR will not necessarily be linked to any change in the Bank of England Base Rate.

Outstanding balance

The total amount of the mortgage that is currently outstanding, inclusive of any repayable interest. As you continue to make repayments, your mortgage balance will get smaller and, as long as you keep up these repayments, your mortgage will be repaid at the end of the term.

Please note, if you wish to redeem your mortgage in full, the payment required may differ from this so you should contact us and we will send you a redemption statement with an exact figure.

Overall cost for comparison/representative example

APRC (Annual Percentage Rate of Charge)

This is a figure which all lenders must quote when referring to mortgages and is intended to help customers compare the overall cost of different mortgages.

The overall cost of comparison is designed to show the total yearly cost of a mortgage, stated as a percentage of the loan. The information shown in a representative example includes rate information and costs like the interest rate payable at the start of the mortgage and after the initial rate period has ended, Product Fee, Valuation Fee and Mortgage Fee. It is the overall cost for comparing between different mortgage deals.

Overpayment allowance

The overpayment allowance is the amount you are allowed to pay off your mortgage (or overpay) in each 12 month period, without incurring any Early Repayment Charges. This varies between different mortgage deals so you should check the individual details of our mortgage deals to find out what the allowance is.

Repayment mortgage

With a repayment mortgage (sometimes called a ‘Capital & Interest’ mortgage), you will make monthly repayments for an agreed period of time (known as the term) until you’ve paid back both the original capital amount you borrowed and all the interest you were charged.

If you already hold a mortgage with us, it may be the case that part of your mortgage is on an interest-only basis. If this is the case we don’t currently offer the transfer of interest-only mortgage parts online. To discuss repaying your interest-only mortgage or transferring to a repayment mortgage, please contact us.

Standard Variable Rate (SVR)

The Standard Variable Rate (SVR) is the rate your mortgage will be transferred to when your deals comes to an end (until you select a new deal) As the name suggests the SVR is a variable rate set by the lender, and can therefore be higher or lower than a mortgage deal rate - so it's worth exploring your options when the end date on a mortgage deal is approaching.

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