Advance
The mortgage loan.
Annual interest
When a regular monthly payment is made, interest is not immediately adjusted. Interest is calculated each year on 1st January, when the interest rate changes or when you make a capital payment. When you fully pay off your loan, your final payment includes interest to the last day of that calendar month.
Annual Percentage Rate (APR)
Designed to help you compare mortgages from different lenders, APR takes into account fees and costs of a mortgage as well as the interest rate.
Arrangement fee
A fee that is sometimes charged for a special deal such as a fixed, discounted, tracker or capped rate mortgage.
Arrears
Overdue regular mortgage payments that have not been made. This may also include other costs or charges the lender has to pay.
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Bank of England base rate
Also known as the 'repurchase' or 'repo' rate, this base rate is the main factor in influencing the interest rates that lenders charge.
Basic mortgage valuation
This is the minimum valuation required by a lender. It helps the lender decide if the property is suitable to secure the loan and worth the amount they're going to lend you.
As a basic valuation, it's a limited inspection of the property that doesn't assess everything about the property's condition or look for hidden problems. It's important to consider a more comprehensive survey when deciding whether or not to buy. Take a look at our homebuyer survey and detailed building survey to find out more.
Borrower
The person or people who borrow money from a lender. When borrowing money to buy property it is usual for the borrower(s) to give the lender security for the loan they receive.
Buildings insurance
Insurance to cover the structure of your home if it's damaged.
Buy to let
A mortgage to buy a property that will be rented out.
Buy to let variable mortgage rate
A rate for buy to let mortgages that changes from time to time.
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Capital
The amount you owe excluding costs and outstanding interest.
Capital payment
There are additional requirements before an extra payment can be treated as a capital payment, for example, you must tell us when you make the payment, it must be paid as a single lump sum and there is a minimum amount. When all of the requirements are met, interest and the regular monthly payment are adjusted.
Capped rate mortgage
With a capped rate mortgage, your interest rate goes up and down in line with our standard variable rate. The difference is that you won't pay any more than your capped rate for the capped rate term – even if the standard variable rate (SVR) is higher. If the SVR falls below the capped rate, you'll pay the SVR.
Completion
The final stage of the buying process when the property is legally transferred to you.
Contents insurance
Cover for all your personal belongings.
Conveyancing
This is usually carried out on your behalf by a licensed conveyancer or solicitor. It establishes the legal boundaries of the property and any local planning applications or developments that may affect the value of the property in the future. It also checks that the seller is the rightful owner.
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Daily interest
With daily interest you'll effectively pay less interest back. When a regular monthly payment is made, interest is adjusted from the next day. Interest is calculated on the 1st of each month, when the interest rate changes or when you make an overpayment. When you fully pay off your loan, your final payment includes interest to the day we receive it.
Data Protection Act
Governs how your personal information can be used – including how it can be obtained, held, used or disclosed by others.
Detailed building survey
Carried out by a professional surveyor, this is the most comprehensive type of survey. It will let you know of any structural problems or necessary repairs.
Direct Debit
A convenient way of authorising recurring payments such as a mortgage payment. Payments can vary in amount and frequency. We tell you before we change your payment. More information about the Direct Debit scheme can be found online at www.thesmartwaytopay.co.uk/did-you-know.asp (opens in new window)
Direct Debit Guarantee
This Guarantee is offered by all banks and building societies that accept instructions to pay Direct Debits. It protects you in the rare event that anything goes wrong.
Disbursements
These are fees that your solicitor pays on your behalf to carry out your legal work including land registry fee, search fees and stamp duty. Your solicitor will add these fees to your final bill.
Discounted rate
A set amount below a variable rate that you pay for a set period from the start of your mortgage.
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Early repayment charge
You may have to pay an early repayment charge if you repay your mortgage early. Your mortgage offer may set out a specific date or time period and allow limited overpayments.
Equity
The difference on the amount you owe on your mortgage and the value of your home.
Essential repairs
Work you must do before your mortgage is issued or within a set period of time after completion. A retention may be made until the repairs are completed.
Extra payments
A payment over and above the regular monthly payment for each month. Conditions and restrictions may apply to extra payments. How interest is affected depends on whether the loan is calculated using the daily interest or annual interest method.
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Financial Ombudsman Service
We're a member of the Financial Ombudsman Service. It offers independent arbitration if you have a complaint that's still unresolved after you've gone through our own complaints procedure. You can contact the Financial Ombudsman Service at:
Financial Ombudsman Service, South Quay Plaza, 183 Marsh Wall, London E14 9SR. Telephone: 0800 023 4567. Mobile: 0300 123 9123
Fixed rate mortgage
The interest rate you pay will stay the same for a set period from the start of your mortgage, whatever happens to other interest rates.
The Financial Services Authority (FSA)
An independent watchdog that regulates the financial services industry. More information can be found online at www.fsa.gov.uk (open in new window)
Further advance
An extra loan that gives you additional funds for home improvements or other things. It's secured against your home.
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Higher lending charge
This is a one-off fee charged by most lenders when your mortgage loan to value is above a specified percentage of the property's value.
Homebuyer survey
This surveys the condition of a property. It covers all parts of the property that are easy to access (but not those that are difficult to reach such as underneath carpets). The report will give a general opinion of the property, identify any potential problems and highlight any areas that need further investigation.
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Initial Disclosure Document (IDD)
This document sets out essential information about the level and scope of a mortgage service provided by a lender or intermediary. It should be given to you when you first contact the lender or intermediary.
Initial interest payment
Each of your monthly regular mortgage payments includes interest for that calendar month. But your first payment will also include initial interest for the first part of the calendar month when you took your mortgage out. So for example, if you took your mortgage out on 15 August, your September payment would include initial interest from 15 August to 31 August in addition to interest for September.
Interest-only mortgage
If you choose an interest-only mortgage, you will only pay the interest on your loan for the whole term of your mortgage. You can pay the capital at the end of your mortgage term in a number of ways. You could invest in an Individual Savings Accounts (ISA), use an endowment policy or repay through a personal pension plan. The important thing to remember is that you'll be responsible for repaying the amount you've borrowed at the end of the mortgage term.
Intermediary
An intermediary is an individual authorised by the FSA to give advice on mortgage products and lenders.
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Key Facts Illustration (KFI)
This summarises a mortgage's key information and what it means to you as an individual. You'll be provided with a KFI before you apply for your mortgage or for a new loan.
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Land Registry
The Land Registry is the organisation that holds records of all property in England and Wales. When you buy or remortgage a property your solicitor has to record the changes with them. Fees are payable for updating their records.
Legal charge
The document signed at your solicitors that gives the lender various rights over the security.
Lender
The organisation that agrees to lend the money to the borrower. Lenders normally require security for the loans they make.
Loan
Each amount of money we lend you, including charges, fees or other costs, is a loan. There may be more than one loan if, for example, you borrow money at different times (e.g. a further advance), with different repayment periods or repayment methods (interest-only or repayment).
Loan to value (LTV)
The amount of your total loan(s) as a percentage of the lower of the value or purchase price of your property at the time the loan(s) is(are) made.
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Membership rights
A mutual building society is owned by its members – see mutual building society. These members have certain voting rights to shape the society.
Monthly payment
The amount you have to pay each calendar month, including interest and where relevant an amount to repay the capital, property insurance and an amount for any other agreement we may reach with you (for example to repay arrears).
Mortgage
Strictly speaking, this is the legal charge and agreement that forms the contract between the lender and borrower, and which gives the lender rights over the security, usually if arrears occur. It's commonly used to mean the loans that have been made which together are secured by the legal charge.
Mortgage offer
You'll receive an offer when a lender approves your application for a mortgage. It will be subject to the lender's terms and conditions.
Mortgage payment protection
This insurance pays your monthly mortgage payments for a set time if you're unable to work because of redundancy, sickness or accident.
Mortgage term
The period agreed at the start of the mortgage at the end of which the mortgage will be fully repaid. How it is repaid depends on the repayment method (interest-only or repayment).
Mutual building society
A mutual building society is owned by its customers and run for their benefit. Unlike banks, there is not a focus on driving profit to pay external shareholders.
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Overpayment
Please see extra payments.
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Portability
Moving home during the tracker, discounted or fixed rate period? Then you can usually transfer (or port) the rest of the tracker, discounted or fixed rate to a new mortgage on a new property without paying an early repayment charge.
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Redeeming your mortgage
Fully paying off all of your loans. An early repayment charge and/or a release fee may be payable.
Release fee
This is charged by lenders when you've fully repaid your mortgage for the work involved in releasing their legal charge on your property.
Remortgage
When you move your existing mortgage to a different lender without moving home.
Repayment method
How you intend to fully repay the mortgage. There are two methods, interest-only or repayment. This is not the same as how you make your regular monthly payments, which will usually be by Direct Debit.
Repayment mortgage
A mortgage is made up of two parts – the capital is the amount of money you've borrowed and the interest you pay on that capital. Each mortgage payment covers the interest due for the month while also repaying part of the capital. If you make all the monthly repayments, you will have repaid the full amount borrowed by the end of your mortgage term.
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Security
This is the property which the lender secures the mortgage against. A lender may need to sell the property to repay a mortgage if you cannot keep up with mortgage payments.
Solicitor search
Checks that your solicitor makes to ensure there are no developments planned that could affect your property and previous work that could have affected the property, for example mining. Fees are payable for these searches.
Standard variable rate (SVR)
This rate is what lenders usually charge for loans on residential property – it changes from time to time.
Stamp duty
A government tax that you have to pay if you buy a property above a certain purchase price. The amount you have to pay varies with the value of the property.
Standing orders
An instruction given in writing by a person holding a current account to their bank or building society to make periodic payments. You control these payments and must tell your bank if the amount needs to be changed.
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Terms and conditions
Usually provided with a mortgage offer, terms and conditions give detailed information about how your mortgage works.
Tracker mortgage
A tracker mortgage gives you the chance to benefit from any changes in interest rates as it follows the independent Bank of England base rate. You'll pay a set amount above or below our tracker mortgage rate for a set time from the start of your mortgage.
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Variable rate mortgage
A mortgage rate that is not linked directly to the Bank of England base rate. The interest rate you pay can change at any time before or after the start of your mortgage. You may pay a set amount above or below your variable rate for a set time from the start of your mortgage.
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