GLOSSARY OF TERMS

FIXED RATE

This is a mortgage where the interest rate is fixed at the start of the term for a period of years. During that time the monthly payment will not change providing you do not miss any of the payments or pay less than the amount due to the lender.

STANDARD VARIABLE RATE (SVR)

A standard variable rate (also known as Standard Mortgage Rate or SMR) – is the standard interest rate offered by a mortgage lender. It’s the rate your mortgage reverts to after the end of the initial deal unless you chose another deal with the lender or remortgages to a new lender.

REPAYMENT MORTGAGE (CAPITAL & INTEREST)

A capital and interest mortgage (often called a Repayment Mortgage) is the most common type of mortgage being offered currently. With this type of mortgage, you’ll make monthly repayments for an agreed time (known as the ‘term’ of the mortgage) until you’ve paid back both the capital and the interest.

This means that the amount you owe will get smaller every month and, if you keep up the repayments, your mortgage will be repaid in full at the end of the term.

PORTING

This feature allows you to move the product you currently have over to a new property if you move house. The interest rates and monthly payments will remain the same after the house move although any additional money you borrow to purchase your new home will be subject to the rates and lending criteria available at the time you apply for the mortgage to be ported.

EARLY REPAYMENT CHARGE (ERC)

this is a charge made by a lender if you repay all your mortgage or part of it before the date at which the initial deal ends. The amount of the charge can be found on your illustration and will vary depending on how early in the term you make the repayment.

REMORTGAGE

Remortgaging is the transfer of a mortgage from one lender to another. You continue to live in the same house, but your monthly payments are made to a different lender. The purpose of Remortgaging is often to obtain a more favourable interest rate when your current deal has expired, but it may also be used to raise additional funds – for home improvements, to repay other debts etc.

DEBT CONSOLIDATION

Debt consolidation is the act of taking out a single loan to pay off debts. You can use a secured or unsecured loan for a debt consolidation.

LOAN TO VALUE (LTV)

LTV or Loan-to-Value is a ratio of the size of your mortgage loan compared to the value of the property and expressed as a percentage.

EQUITY RELEASE

You can release ‘equity’ from your home without having to sell it and move out. The term ‘equity’ is used to describe the difference between the market value of the house and the mortgage amount. The main reasons why customers release equity from their homes is to enable them to carry out home improvements, lend/give money to family members or to repay their existing debts.

LIFETIME MORTGAGE

With a lifetime mortgage a lender will make a loan to you and your home will be used as security.

Unlike a conventional mortgage, which runs for a fixed term, a lifetime mortgage is designed to run for the rest of your life. During this period, the property remains 100 per cent in your name, and you are free to live there until you die or move into long-term care.

For joint applicants, should one partner die or move into long term care, the plan would then continue in the sole survivor’s name.

You won’t need to make monthly repayments – interest compounds or ‘rolls up’ and, thus, increases the debt over time. Any proceeds left after repaying the lender are then passed onto your estate and distributed to your beneficiaries.

FLEXIBLE DRAWDOWN PLANS

This is a variation of a Lifetime Mortgage which allows you to set up an agreed maximum facility for a specified period (based on your age and house value) but take just as much as you want initially and take further money (up to the maximum agreed facility) when required.

This helps save the debt building up as fast as interest is only charged on the amount actually outstanding at any one time. Some schemes may also allow voluntary partial repayments to reduce the debt.