Glossary of mortgage terms
Click on the relevant letter to jump down to explanations of the most commonly used mortgage terms.
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Affordability based lending
The amount we will lend you based on what you can afford, looking at your income and expenditure instead of income multiples.
Agreement in principle (AIP)
The stage of your Mortgage application that shows how much we will lend you subject to certain conditions being met, such as credit checks, proof of income, and a satisfactory property valuation.
Annual percentage rate (APR)
APR represents the total cost of borrowing by taking into account all costs associated with the loan e.g. interest rate, legal fees and valuation fees. By law, we must show the APR alongside our quoted interest rates - it allows you to compare the true cost of borrowing between other lenders in the marketplace.
Arrears
If you fall behind with your Mortgage Payments, you will become in arrears. You must let us know if you are unable to make a Mortgage Payment.
Bank of England Base Rate
The Bank of England Base Rate determines lending rates in the UK. It is set by the Bank of England's Monetary Policy Committee who meet every month.
Bridging Loan
A bridging loan is a short-term, high interest loan typically to enable the purchase of one property before the sale of another (so that funds are available for the purchase).
Broker
An Intermediary who helps you find a Mortgage. They will usually charge commission or a fee for this service.
Buildings Insurance
An insurance product that you must have and which covers you against certain building losses or damage to your property.
Buy To Let Mortgage
A Mortgage for people who buy property and intend to rent it out.
Capital
The sum of money you borrow in order to buy your home. In addition to paying back this sum, you will also have to pay back interest.
Cash Reserve
A drawdown feature of our Mortgages that allows you to borrow the difference between the amount we are willing to lend you when you first apply for your Mortgage, and the amount you actually borrow. You can borrow back this amount at the Mortgage rate, for any reason.
CHAPS
Clearing House Automated Payment System. CHAPS achieve a same day transfer from one bank account to another.
Completion date
In terms of your Mortgage, this is the point at which the legal formalities are finalised and the funds are released.
Contents Insurance
An insurance product that covers you against certain damages or losses to your personal possessions.
Conveyancing
The process of transferring property from one party to another, usually managed by a solicitor.
Credit Re-assessment
A process where we look at your income, expenditure and the latest value of your property to assess if we can lend you more money.
Discount Rate
A guaranteed reduction on the Standard Variable Rate (SVR). It is usually only available for an agreed period of time, after which the interest rate reverts to the full SVR.
Early Repayment Charge
A charge payable if you repay your Mortgage during the tie-in period. The charge is also payable if you overpay more than 10% of the outstanding balance on our Fixed Rate Mortgage.
Equity Release Mortgage
A Mortgage taken out on a home that you already own to receive either a lump sum of cash or regular instalments. An example would be a Lifetime Mortgage where the interest is added to the loan and the whole amount is repaid when you die or move into long-term care, usually from the sale of the house.
Financial Ombudsman
An independent body who offer a free service to help settle individual disputes between businesses providing financial services and their customers.
Fixed Rate Mortgage
A Mortgage in which the interest rate is set for an agreed period of time. After which the interest rate reverts to a variable rate, usually the Lender's Standard Variable Rate.
Independent Financial Adviser (IFA)
A person qualified to give financial advice who is not tied to any one financial institution.
Interest Only
This means the Mortgage Repayments only cover the interest accrued on the capital you have borrowed. You then pay off the capital, at the end of the Mortgage period.
Intermediary
An adviser who helps you choose a Mortgage that's right for you and makes your application to us. An intermediary can be an IFA, a Broker, a solicitor, an estate agent or an accountant.
Key Facts Illustration (KFI)
A Mortgage illustration which is in the format prescribed by the Financial Services Authority and can be used to compare different Mortgage products from different lenders.
Loan to Value (LTV)
The size of a Mortgage as a percentage of the value of the property. For example, a £75,000 Mortgage on a house that's valued at £100,000 means a LTV of 75%.
Mortgage
A loan which is secured against your property.
Mortgage Payments
The regular instalments made towards paying back the capital and/or interest of a Mortgage.
Mortgage Payment Protection
An insurance policy that covers your monthly Mortgage payments in the event of accident, sickness or unemployment.
Offer
A stage in the Mortgage process where we approve your application and set out in detail the terms and conditions of the Mortgage.
Offsetting
A facility available on some of our Mortgages that allows you to use money such as your savings to help reduce the interest you pay on your Mortgage or reduce the length of your Mortgage term.
Overpayments
A facility available on some of our Mortgages that allows you to make additional payments over and above your normal monthly payments. This can help to reduce the term of your Mortgage or decrease your monthly payments.
Payment Holiday
If money is tight, you can request to take a break from your monthly Mortgage payments. The amount is simply added to what you owe, and your remaining Mortgage payments will increase to cover it.
Redemption
The termination of your Mortgage by paying off the balance in full.
Remortgaging
The process of paying off a Mortgage with the proceeds of a new one using the same property as security, usually with a new lender.
Repayment Mortgage
If you take out a repayment Mortgage, every month you will pay back some of the capital as well as the interest on the sum still outstanding.
Survey
The purpose of a survey is to determine the value and/or structural integrity of a property. There are three types of property survey – a basic valuation, a homebuyers report and a full structural survey. You will need to have at least a basic valuation to get a Mortgage with us.
Term
The length of time over which your Mortgage is to be repaid.
Value
This is how much your home is worth in the current housing market. This may differ from the amount of money you paid for your home.
Valuation
A quick check of the property by an approved surveyor to assess its value.
