| Mortgage Glossary |
|
BASIC PHRASE:
|
HOW IT WORKS:
|
IN MORE DETAIL:
|
|
Key Facts Illustration
|
This is sometimes called a KFI. You will get
a KFI if you ask for a written mortgage quotation.
It summarises the most important features and
costs of the mortgage in a standard way so you
can compare it with other similar mortgages.
|
Your mortgage adviser must always give you a
KFI before you apply for a mortgage, so you can
make sure it's right for you.
|
|
Mortgage Booking Fee/Arrangement Fee
|
Payable to the lender, usually to reserve your
mortgage funds or to cover the administration
costs of processing your mortgage.
|
The cost of this fee will vary from lender to
lender and can be higher for an especially low
interest rate or for a large loan.
|
|
Valuation Fee
|
Payable to the lender for assessing the value
of the property and whether it is safe for the
lender to lend against.
|
The cost will vary depending on the lender and
the value of the property.
|
|
Higher Lending Charge
|
Payable to the lender if you’re borrowing
a high percentage of the property's value. The
lender may charge this fee to take out insurance
cover. This protects them if you can't pay back
your loan and they have to see your house at a
loss.
|
The cost varies from lender to lender and depends
on the value of the property and how much you
borrow.
|
|
Fixed Rate
|
Your payments are the same for a certain period,
say two years, five years, ten years or even longer.
Unless the rate is fixed for the whole term, you
must pay the lender's standard variable rate*
at the end of the fixed rate period.
|
You may have to pay a penalty if you need to
repay the mortgage before the end of the fixed
rate, some lenders even charge penalties after
the fixed rate has ended. This penalty will be
explained and cash examples given in the KFI
|
|
Tracker Rate
|
With this variable rate loan, the interest rate
is a set amount above or below the Bank of England
or the lender's own base rate, and so always "tracks"
changes in that rate. At the end of the deal period
the lender usually charges you the standard variable
rate*
|
You may have to pay a penalty if you need to
repay the mortgage before the end of the tracker
rate deal, sometimes even after that. This penalty
will be explained and cash examples given in the
KFI
|
|
Discounted Rate
|
Your payments are variable, but they are set
at less than the lenders standard variable rate*
for a period of time. At the end of this period
the lender usually charges you it’s standard
variable rate*
|
You may have to pay a penalty if you need to
repay the mortgage before the end of the discounted
rate, sometimes even after that. This penalty
will be explained in the KFI.
|
|
Capped Rate
|
Your payments are variable and often linked
to the base rate, but fixed not to go above a
set level during the deal period. At the end of
the deal the lender usually charges you its standard
variable*
|
You may have to pay a penalty if you need to
repay the mortgage before the end of the capped
rate, sometimes even after that. This penalty
will be explained and cash examples given in the
KFI
|
|
Standard Variable Rate
|
Your payments go up and down when the lender's
mortgage rates changes. Mortgage rates tend to
move in line with the Bank of England baser rate
but there is sometimes a delay.
|
You do not normally have to pay a penalty if
you wish to repay this mortgage.
|
|
Repayment Mortgage
|
Your monthly payment is split between paying
the loan off and paying off the interest you own
on the loan.
|
It's a simple, clear approach - you can see
your loan getting smaller. If you make all your
payments on time, the loan will be fully paid
off by the end of mortgage term
|
|
Interest-Only Mortgage
|
Your monthly payment pays only the interest
charges on your loan and you must arrange some
other way to repay the loan.
|
Because you’re only paying the interest
your monthly payments will be lower than an equivalent
repayment loan. It’s very important you
arrange some other way to repay the loan, for
example, through an investment or savings plan.
|
