Mortgage glossary

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
• The amount of interest you will repay.

Make sure you pay attention to the product fee when comparing deals.

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.

Additional features

Some of our deals may come with:

• Cashback
• Free standard legal service
• Free standard valuation

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 part of it. You can find your total mortgage and part balances on the letter we sent you about your mortgage deal ending or on our website.

APRC (Annual Percentage Rate of Charge)

The APRC is designed to show the total yearly cost of a mortgage, stated as a percentage of the loan. It is calculated by taking into account the mortgage interest rate and the term of your mortgage, plus any fees.

Arrears

If you miss a repayment on your mortgage, this means you have gone into arrears.

This can lead to issues with your credit history in the future. If you continue to miss repayments this could result in the repossession of your home.

Base rate

This is the interest rate set by the Bank of England. Variable rate mortgages can be affected by changes in the base rate.

Capital

A mortgage has two parts. Capital is the money you borrow. Interest is the charge made by the lender on the amount you owe.

Capital repayment / repayment mortgage

The most common type of mortgage. You make monthly repayments for a fixed period until you’ve paid back both the capital and the interest.

At the end of the mortgage term, if you have paid everything you agreed to, you’ll be mortgage free (OR) you won’t owe anything to us.

Capped standard variable rate

If the SVR on your mortgage is capped, the rate you will pay will not exceed a set rate for a set period.

Collar

A mortgage collar is the minimum interest rate a variable or tracker rate could fall to.

Conveyancing

This is the legal process of buying or selling a home. To buy or sell a home you must have a conveyancer acting on your behalf.

Deposit

This is the amount you will need to save to put towards the cost of a home. How much you need for a deposit will depend on how much the home costs and the mortgage deal you pick.

Decision in principle

This tells you if a lender can lend to you and how much. It can be a good idea to do this before looking for a home.

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.

You may be placed onto a discounted SVR mortgage after you finish a fixed rate mortgage deal with us.

Our SVR can go up or down at any time. This may affect the interest rate of your mortgage. Any changes to our SVR will not necessarily be linked to any change in the Bank of England Base Rate.

Early repayment charge

An early repayment charge (ERC) is a fee you may have to pay if you:

• Pay off your mortgage before your current deal ends
• Make any overpayments above the limit of your mortgage deal
• Transfer (either in full or in part) to another deal or to our Standard Variable Rate before your current deal ends

End date

The date at which your mortgage deal ends. Unless you pick a new deal, you will be moved to our SVR.

Equity

This is how much you ‘own’ of your home. This is worked out by taking the current market value of a property and taking away the remaining mortgage balance.

You can build equity by paying off your mortgage. If you pay a bigger deposit, you will also start with more 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.

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) benefits from the equivalent of the interest rate charged on your Offset mortgage.

The equivalent savings rates differ between Offset mortgage deals, depending on interest rates. Details are on the webpages and factsheets for our mortgage deals. The equivalent savings rate also depends on your individual tax status.

Estimated monthly repayment

This gives you an idea of how much you would pay back each month. This is based on a given deal, using the home value, deposit, and loan term details.

Estimated property value

This is how much our latest valuation states your home is worth.

Estimated total cost for the deal period

The total amount you’ll repay for your mortgage over the initial period of this deal. We use any applicable fees for a chosen mortgage deal, the monthly repayment, and the deal period to estimate how much a deal might cost.

It assumes the rate doesn't change over the deal period and that the product fees are added to the mortgage loan.

Estimated total cost for the first year

How much you might repay for your mortgage within the first year.

It assumes the rate doesn't change over the deal period. It also assumes that the fees associated with the product are added to the mortgage loan.

Existing Borrower Transfer (EBT)

When you transfer to a new mortgage deal with the same provider.

Fixed rate

A fixed rate mortgage has a set interest rate for the initial period of the deal. It won’t go up or down, even if the base rate changes.

Higher lending charge (HLC)

The higher lending charge is a fee to cover the higher risk on lending a higher proportion of the value of a property.

Initial period

The initial period is how long your mortgage deal will run. After this period, it will switch to a reversionary rate, usually our SVR (standard variable rate) unless you choose a new mortgage deal.

Insurance

You will need to have buildings insurance in place when you get a mortgage.

Interest only mortgage

This is a type of mortgage where your payments go towards paying the interest of your mortgage only.

You must repay the total cost of the mortgage loan at the end of the term with a ‘repayment strategy’. These can be from your pension, dividends from investments or other sources of income

Interest rate

The interest you will pay on a mortgage deal, shown as a percentage.

Loan to value (LTV)

This is the size of your mortgage as a percentage of the value of the property you wish to buy. Or, how much of the property you own if you are remortgaging or changing deal.

For example:

• Purchase price of £200,000
• Mortgage of £180,000 + deposit of £20,000
• Means a loan to value of 90%.

Maximum loan amount

The maximum amount we will lend to a customer. This depends on the mortgage deal you choose. You can find this on the factsheets and online mortgage deal pages.

Minimum loan amount

The minimum amount we will lend to a customer. This depends on the mortgage deal you choose. You can find this on the factsheets and online mortgage deal pages.

Monthly payment for amount switched

An estimated monthly repayment gives you an idea of how much you would pay back each month, 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 each month.

Monthly repayment

How much you would pay back each month on a deal for a repayment mortgage, it is calculated using the:

• Property value
• Deposit
• Term details you have provided.
• This includes what you have borrowed and the interest.

Mortgage balance

This is the amount you have still to pay on your current mortgage deal.

Mortgage exit fee

You may have to pay this if:

• You repay the mortgage in full before the end of the mortgage term
• You remortgage to another lender

Or

• You transfer your mortgage product from one property to another.

This is payable before the end of your mortgage term if you refinance the loan to another lender or another property (known as ‘redemption’).

This fee does not apply when your mortgage term naturally comes to an end.

Mortgage part(s)

Your mortgage may be made up of different ‘parts’. These are separate mortgage deals that make up your total mortgage.

Mortgage term

The length of time you take a mortgage out for, usually 20, 25 or 30 years. Your term is the total length of time before your mortgage is repaid in full.

This shouldn’t be confused with a fixed rate period or the initial period, which is usually a shorter period.

Negative equity

Negative equity occurs when the market value of a property falls below the amount owed on a mortgage. This is usually due to falling house prices.

Offset mortgage

Offset mortgages use your savings to reduce the cost of your mortgage, so 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 while letting you keep access to your savings.

Outstanding balance

The total amount of the mortgage that is currently outstanding, inclusive of any repayable interest.

As you make repayments, your mortgage balance will get smaller. If you keep up these repayments, your mortgage will be repaid at the end of the term.

Overall cost for comparison

The overall cost for comparison shows the total yearly cost of a mortgage over its lifetime, stated as a percentage of the loan (the APRC).

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. You should always 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.

Porting

The process by which you can move your mortgage deal from one property to another.

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.

You can ask for the fee to be added to your loan, which will increase both the amount you borrow and how much you will pay back.

Redemption

Mortgage redemption refers to the repayment of a mortgage loan in full or when you move to another provider.

If you wish to repay your mortgage early, you can get a redemption statement from your lender 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.

This is not the same as an existing borrower transfer which refers to switching to a new deal with the same provider.

Repayment type

This is the basis on which you repay your mortgage, and your payments are worked out. This could be either repayment (also known as ‘capital and interest’) or interest only, or both – called a ‘part-and-part’ mortgage.

Representative example

A representative example includes all the interest rates and fees a customer may pay for a mortgage deal. This can give you an idea of how much your mortgage may cost and allows you to compare different deals fairly.

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, Scotland, Wales and Northern Ireland. The rules are slightly different in each place.

Standard variable rate (SVR)

The standard variable rate (SVR) is the rate your mortgage will be transferred to when your deals come 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.

Title deeds

Title deeds are 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 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. This is a limit on how high or low your mortgage interest rate can be.

Transfer of equity

A transfer of equity occurs when someone is either added to, or removed from, the title deeds of a property. This can sometimes occur when joint holders of a mortgage are separating or when there has been a bereavement.

Unavailable to switch

You may not always be able to switch your whole or part of your mortgage to a new deal.

This may be because it does not meet our eligibility rules. For example, where the remaining term or outstanding balance are below the minimum qualifying amount.

Variable rate mortgage

A type of mortgage where the interest rate goes up and down. This is opposite to a fixed rate mortgage, where the rate is the same throughout a set period.