Mortgage Jargon Buster
Mortgages
5.00%
7.24%
Rates effective from 27 Feb 2008. Current Bank of England Base Rate is 5.00%. Current Standard Variable Rate (SVR) is7.24%.
Setting up a mortgage can be a confusing process, so to help you understand exactly what the mortgage terms mean, we have devised this mortgage jargon buster.
Agreement in principle
An agreement in principle gives you an indication of the likely outcome of a loan application. It is not a formal offer, but is an assessment of your ability to repay the loan amount requested.
Once you have been given an agreement in principle we will make further checks to validate the information you have provided and check that the house is suitable for us to lend against. At that stage we would then make you a formal offer of loan.
Annual Percentage Rate or Overall Cost For Comparison (APR)
An APR is the true and total cost of borrowing. Where an APR is quoted it will be based on the total charge for credit including fees and other charges for arranging a mortgage. This figure allows you to compare the cost of different mortgage products.
Appreciation
Appreciation is the increase in the value of a property as a result of changes in market conditions or improvements made.
Arrangement Fee
An arrangement fee is a fee payable to the mortgage lender and is specific to the mortgage product you’ve chosen. The fee can be added to the amount you want to borrow or can be paid upfront.
Arrears
Arrears are the amount, usually in either months or pounds that your payments have fallen behind schedule.
Asset
Any form of property owned by a person, including currency, stocks, and enforceable claims against others.
Building Society
A Building Society is a mutual organisation which purpose or principal purpose is to provide mortgages and savings accounts.
Buildings Insurance
This is an insurance policy which pays the cost of repair or rebuilding in the event your property is damaged or destroyed. Most mortgage lenders will require you to take out buildings insurance as a condition of their loan.
Buy To Let
A Buy to Let property is a property which is purchased and to be used solely for the purposes of renting out to a third party.
Bank of England Base Rate
The Bank of England Base Rate is the rate of interest set by the Bank of England and is officially called the Bank of England repo rate.
Capital Repayment
A Capital Repayment is a payment (either lump sum or monthly), which will reduce the capital owed or the term of a mortgage.
Capped Rate Mortgage
A capped rate mortgage sets a maximum rate of interest that the lender can charge.
Cash Back Mortgage
A cash back mortgage offers you the opportunity to receive a cash lump sum, usually at the beginning of your mortgage. This may be an agreed percentage of the amount that you borrowed or a fixed amount.
Cash back mortgages often offer a cash sum for amounts such as 1%, 5% or even 10% of the mortgage amount. So, if you borrow £100,000 and the cash back is 4% of the mortgage loan, you would receive £4,000 on completion of your house purchase or remortgage.
Cashbacks that pay a fixed sum are typically for amounts between £100 and £1,000.
County Court Judgment (CCJ)
A CCJ is a ruling for bad debt issued by a County Court or higher court. The judgment is recorded and will show up during any credit checks and can count against you in your mortgage application.
Contents Insurance
Insurance that covers the contents of your home, including electrical goods, carpets, furniture and curtains.
Decreasing Term Assurance
Mortgage Decreasing Term life assurance is designed specifically to protect a capital repayment (capital and interest) mortgage. You choose the amount of cover you need and the length of the plan, based on how much you have borrowed and for how long. The premiums you pay remain the same throughout the term; however the cash lump sum payable decreases to reflect your decreasing mortgage loan. The plan has no cash-in value at any time.
Discounted Rate Mortgage
A discounted rate mortgage is a mortgage where the initial interest rate is discounted from the Lender’s published Standard Variable Rate, or the Bank of England Base rate, for an agreed period of time.
Early Repayment Charge
A charge levied on the customer in the event the amount of the loan is repaid in full or in part before the end of a particular agreed period.
Equity
The amount of money either put into buying a property or the deposit placed on a property. It is also known as capital.
Fixed Rate Mortgage
A fixed rate mortgage means that no matter what happens to interest rates, your mortgage rate stays the same for an agreed period. If that period ends before the end of the mortgage term your mortgage will “revert” or “go to” to a different interest rate. This will typically be either a Lenders Standard Variable Rate, or a rate which is linked to the Bank of England Base Rate. This interest rate may be higher or lower than the fixed rate you've been paying. If the interest rate is higher, your payments will increase.
Flexible Mortgage
A flexible mortgage or flexible features allow you to make overpayments, underpayments, or take a payment holiday.
Further Advance
When your mortgage lender makes further money available to you and that additional amount is included within first charge on the property. A further advance is usually made to do home improvements or consolidate debt.
Gazumping
This is when another potential buyer puts in a higher offer for the property after your offer on the same property has been accepted.
Guarantor
A person, other than the borrower, who guarantees the mortgage repayments in the event the borrower defaults. Typically the guarantor will be a parent or relative.
Higher Lending Charge (HLC)
A Higher Lending Charge is a charge made by the lender which you may have to pay if you are borrowing more than 90% of the purchase price or property valuation, whichever is the lower. This charge is typically added to the loan or deducted from the advance on completion to protect the lender against the risk of lending you a higher sum on your property. It does not provide any protection for you.
Income Multiple
An income multiple or income multiplier is the formula used by most lenders to calculate how much a person can borrow.
Interest Only Mortgage
An interest only mortgage is where a borrower only repays the interest on the loan for the duration of its term, and repays the capital at the end of the mortgage period.
Joint Income
Joint Income is the total gross income of all the borrowers in a joint mortgage application.
KFI (Key Facts Illustration)
The KFI summarises all the important features of a mortgage. It must be presented in a standard way, so you can check the cost and terms of the mortgage and compare it with other similar mortgages.
Landlord's Reference
A Landlord reference is given by a landlord, which confirms an applicant's history of payment and conduct as a tenant.
Level Term Assurance
Level Term assurance is a type of life assurance policy which provides a guaranteed lump sump in the event of death. This can be used to repay a mortgage and is typically used to protect an interest only mortgage.
Loan to Value (LTV)
A loan to value refers to the amount you are borrowing as a percentage of either the property value or the purchase price, whichever is the lower.
Mortgage
A loan made against a property.
Mortgagee
The lender.
Mortgagor
The borrower.
Offer of Advance
Once a mortgage application has been assessed, you will receive an offer of advance. The offer will show you how much the lender is prepared to lend and on what terms.
Overpayment
An overpayment is a payment in addition to your normal monthly payment. Some mortgages (typically flexible mortgages) allow for overpayment, but others may impose early redemption charges for overpayment.
Payment Holiday
A payment holiday is an agreed period of time when you can take a break from making payments. Some mortgages (typically flexible mortgages) allow for payment holidays, but others may impose charges.
Portable Mortgage
A portable mortgage may be transferred to another property. If you decide to move you can take your mortgage on the same terms and conditions to your new property , subject to the lender’s requirements at that time.
Re-mortgage
Moving your mortgage from one lender to another without moving house.
Re-inspection Fees
A fee levied if the lender needs to re-inspect the property after the original valuation. Typically this is carried out to check if you've made agreed repairs.
Repayment Mortgage
A mortgage where the monthly payments cover both the interest and a portion of the capital owed. This means that the outstanding mortgage balance will reduce year on year over the term of the loan.
Retention
A retention is where the lender to holds back (or retains) a part of a mortgage loan until certain conditions are met.
Right-to-Buy mortgages
Right-to-buy Mortgages are for public sector tenants who qualify to buy their home under the Government's Right-to-Buy scheme.
Stamp Duty Land Tax
You currently have to pay Stamp Duty Land Tax if you are moving home and your new home costs more than £125,000 (there are areas which are exempt). The amount owed is calculated on the whole purchase price.
Standard Variable Rate (SVR)
A Standard Variable Rate (SVR) is the rate that is offered by a lender and is usually the rate that mortgages revert to (or go to) after a fixed, capped or discount term ends.
Our Standard Variable Rate is currently 7.49%.
Term
The length of time of a mortgage loan.
The Scarborough Group
The Scarborough Group is made up of Scarborough Building Society, Specialist Mortgage Services Limited, trading as North Yorkshire Mortgages Limited and Scarborough Channel Islands Limited.
Tracker Mortgage
A Tracker mortgage is a mortgage where the interest rate is linked directly to the Bank of England Base Rate. Whenever the Bank of England Base Rate changes, the rate on the tracker mortgage are guaranteed to change by the same amount, within an agreed period.
Unencumbered
A property that has no loans secured on it.
Valuation Fee
A valuation will take place whether you are purchasing or re-mortgaging a property, to ensure it provides adequate security for the lender. There is a charge for this valuation and the charge increases with the valuation/purchase price. There are 3 types of valuation; a Basic valuation, a Homebuyers' Report, and a Structural survey.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
Intermediaries
This page is for the use of new & existing customers only. If you are a Mortgage Broker, please visit our Intermediary Website.