Mortgage Glossary | YBS
Mortgages explained
Help with understanding mortgages and mortgage terminology
Ever get the feeling when you’re looking for a mortgage that there’s a lot of jargon you don’t understand? Let us help you understand the mortgage definition of terms such as fixed rate, offset, remortgages, loan to value, SVR and APRC.
Adding fees to your loan
Where a mortgage deal has a product fee, you can choose to add this fee to the loan amount. If you decide to add the product fee to the loan amount, you should be aware that this will increase your monthly payment, the total amount that you borrow and the amount of interest you will repay.
You should be aware that although a mortgage deal may have the lowest interest rate or the lowest monthly mortgage payment, this doesn’t necessarily mean that it will be the cheapest product overall - remember to include the product fee which is paid to secure this lower rate. Therefore you should compare deals with no product fee, with the product fee paid upfront or with the product fee added to the loan so you can understand which deal might be most cost effective for your circumstances.
If a product fee is payable and you choose not to add the fee to your loan, you will need to pay this in full before we will issue your mortgage offer (for new customers) or we will switch your mortgage to a new deal (for existing customers).
Amount being switched
The amount being switched to a new deal will depend on how many parts your mortgage has and whether those parts are all on the same current deal and are therefore ending at the same time. This might mean that the whole of your mortgage balance is switched to a new deal or only a portion of it. You can find your total mortgage and part balances on the letter we sent you about your mortgage deal ending or alternatively on our website.
Arrears
Understanding mortgages is vital when it comes to repayments. If you miss a repayment on your mortgage, this means you have gone into arrears or ‘defaulted’ on your mortgage. This can potentially lead to issues with your credit worthiness in the future. If you continue to miss repayments this could result in the repossession of your property. We have help and advice on what to do if you are having trouble paying your mortgage.
Capital Repayment
A capital repayment mortgage is the most common type of mortgage. With this type of mortgage, you agree to make monthly repayments for a fixed period of time (known as the ‘mortgage term’) until you’ve paid back both the capital (the amount you originally borrowed) and the interest (the sum the bank or building society charges you for borrowing the capital).
As long as you keep up the repayments, your mortgage will be repaid at the end of the mortgage term.
Collar
A mortgage collar, commonly referred to as a mortgage floor, is the minimum interest rate a variable or tracker rate could fall to.
Conveyancing
This is the legal process of buying or selling property. In order to buy or sell a property you must have a legal representative acting on your behalf – usually a solicitor or licenced conveyancer.
Find out more about Conveyancing and the legal process
Decision in Principle
This is an assessment by a mortgage provider of your basic income details and expenditure. It tells you whether or not they would be able to lend to you and how much they would be able to lend.
You can find out more about how this works and what’s involved by viewing our Get a Decision in Principle page.
Early Repayment Charge
The fee which we will charge you if you make a repayment of capital, switch to a new mortgage deal or repay your mortgage entirely within the Early Repayment Charge Period, which is detailed in the mortgage deal factsheet and your mortgage offer. See Capital Repayment.
End date
The date at which your mortgage deal ends and the interest rate is no longer applicable. Unless you pick a new mortgage deal you will be transferred to a reversionary rate which in most cases will be the Standard Variable Rate (SVR).
You should know that although mortgages refer 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.
Equity
This is the value of your ownership of a particular property – usually calculated by taking the current market value of a property and subtracting the remaining mortgage repayments. This value is built up over time as the market value of the property changes and you pay off more of your mortgage.
See also negative equity
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 benefits 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 repayment 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.
Estimated total cost for the deal period
The estimated total cost represents the total amount you’ll repay for your mortgage over the term of this deal. We use any applicable fees for a chosen mortgage deal, the estimated monthly repayment amount and the deal period (in months) to estimate how much a deal might cost.
It assumes the rate doesn't change over the deal period and that the fees associated with the product are added to the mortgage loan.
Estimated total cost for the first year
The estimated total cost represents the total amount you’ll repay for your mortgage within the first year. We use any applicable fees for a chosen mortgage deal, the estimated monthly repayment amount and the deal period (in years) to estimate how much a deal might cost.
It assumes the rate doesn't change over the deal period and that the fees associated with the product are added to the mortgage loan.
Existing Borrower Transfer (EBT)
The process by which a customer transfers to a new mortgage deal with the same provider. This differs to a remortgage which is taking out a new mortgage on a current property with a new provider.
View our guide to Changing your mortgage deal for more details
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.
Fixed rate
A Fixed rate mortgage offers the stability of a fixed rate of interest until an agreed date, with the interest rate remaining the same throughout the term of the mortgage deal. This is different to other types of mortgage where the interest rate may vary during the term of the mortgage deal.
Explore our Fixed rate mortgages
Higher Lending Charge (HLC)
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.
Initial period
The initial period is how long your mortgage deal will run for before switching to a reversionary rate, usually our SVR (Standard Variable Rate).
Insurance
You will need to have buildings insurance in place when you obtain a mortgage. We currently offer You Choose Home Insurance for buildings and contents through Royal & Sun Alliance – you can add home insurance and life cover as an extra option when applying for a mortgage with Yorkshire Building Society.
Interest Only mortgage
This is a type of mortgage where your monthly repayments go towards paying the interest of your mortgage only, and not towards repayment of the capital. With an Interest Only mortgage you have to repay the total cost of the mortgage loan at the end of the term via alternative methods, called ‘repayment strategies’. These can be pension endowments, dividends from investments or other sources of income.
Interest rate
The Interest rate is the percentage rate at which mortgage lenders calculate the interest they charge the borrower for the mortgage.
At the end of the initial period you will usually be transferred to our Standard Variable Rate (SVR) for the remaining mortgage term.
Loan size
Minimum loan amount
The minimum amount we will lend to a customer. 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
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 or changing mortgage deal).
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.
Monthly payment for Amount switched
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, for the amount that’s being switched to a new deal. The repayment includes money to repay the amount you’ve borrowed (the capital), as well as the interest on this sum. If you’re not switching the whole of your mortgage to a new deal, you will need to add it to the monthly payment for the rest of your mortgage to see how much you will be paying overall each month. You can find your monthly payment for each part on the letter we sent you about your mortgage deal ending or alternatively on our website.
Monthly Repayment
How much you would pay back each month on a given mortgage deal for a repayment mortgage, using the property, deposit and term details you have provided. The payment includes money paid back towards what you've borrowed, as well as the interest on this sum.
On our mortgage listings pages you will sometimes see Estimated Monthly Repayment shown – this provides an illustration of how much your repayments would be on a specific mortgage deal, depending on the amount borrowed, property and mortgage term.
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 (EBT). You can find out which parts of your mortgage are eligible for an EBT through the Call Centre or in branch, or by logging in to your online account.
If you have more than one mortgage part and these each have different product end dates, then you may be offered an alternative product range for each. This is because they are designed and created specifically for the time your existing deal ends. If you have any questions, please see our FAQs or contact us on 0345 166 9510.
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 a shorter 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 interest rate may vary.
Explore our Fixed rate mortgages
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 can 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 while still letting you retain access to your savings.
Find out more about Offset mortgages
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 5.24% (our SVR, which is currently 8.24% 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 our SVR will not necessarily be linked to any change in the Bank of England Base Rate.
YBS presently has no Discounted SVR mortgages on sale.
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 while still letting you retain access to your savings.
Find out more about Offset
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 repayment 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
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, the product fee, valuation fee and the mortgage fee. It is the overall cost for a mortgage and allows customers to fairly compare different mortgage deals.
Overpayment allowance
The overpayment allowance is the amount you are allowed to overpay (that is, pay off from your mortgage) 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.
Payments when deals end
When your mortgage deal ends, unless you switch onto a new deal, your mortgage payment will be calculated using our Standard Variable Rate (SVR) of interest. This is normally higher than the interest rate on the deal that has expired, so your monthly mortgage payment is likely to increase. Also, as our SVR is variable, it may change (either increase or decrease) at any time.
Porting
The process by which you can move your mortgage deal from one property to another – i.e. if you wish to move to a new property but would prefer to keep your existing mortgage deal. Sometimes it’s possible to change the amount you’re borrowing when moving home – either borrowing more if you think you may need funds for some home improvements, or borrowing a bit less if you are downsizing.
Read more about Moving Home and taking your mortgage with you
Product fee
The product fee, or arrangement fee, is the fee we charge you for your selected mortgage deal. The fee is payable in full and the funds must be cleared before we can issue your mortgage Offer. Alternatively you can choose to add the fee to your loan, which will increase both the amount you borrow and your monthly payments.
Redemption
Mortgage redemption refers to the repayment of a mortgage loan in full, usually when the mortgage term ends and all scheduled repayments have been made. If you wish to repay your mortgage early, for instance by making a lump sum payment, you can obtain a redemption statement from your mortgage provider that provides you with a settlement figure.
Remortgage or remortgaging
The process by which you switch your mortgage to a new one with a different provider, either within the period of your existing deal or when your existing deal ends. This is not the same as an existing borrower transfer which refers to switching to a new mortgage deal with the same provider.
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.
Repayment type
This is the basis on which you repay your mortgage and your payments are calculated. This could be either Repayment (also known as ‘Capital & Interest) or Interest Only, or both – called a ‘Part-and-Part’ mortgage.
For further details, please see Repayment mortgage and Interest Only mortgage.
Stamp duty
Stamp duty is a tax imposed when a property or piece of land is purchased in England, Wales and Northern Ireland. Currently the threshold for payment of stamp duty is £125,000 for residential properties and £150,000 for non-residential land and properties.
In Scotland the rules are slightly different – there is no stamp duty to pay but instead there is a Land and Buildings Transaction tax which works in a very similar way.
You can find out more about stamp duty on the Gov.uk website and information on the Land and Buildings Transaction Tax on the Revenue.scot website.
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.
Title deeds
Title deeds are paper documents showing the ownership of a particular property or land. Most title deeds are now stored only as digital copies at the Land Registry but you may be able to request scanned paper versions from the Land Registry.
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
Unavailable to switch
Although the majority of our mortgages are eligible for switching in full to a new deal, there are some circumstances in which all or part(s) of your mortgage may not meet our eligibility rules, for example, where the remaining term or outstanding balance are below the minimum qualifying amount. Please contact us for further details.