mortgages

Buying a house

Mortgage terms explained

Endowments

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Mortgages can be a minefield

Fixed rates, capped rates, discount variable rates, variable rates, flexible…. Remortgaging, Buy to let, mortgage protection.

You need advice to help you with one of the single biggest decisions you will take in your life: Buying a property. It's vitally important to have a safe pair of hands to guide you through the maze, carefully and thoughtfully to a conclusion that is right for you.

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Annual Percentage Rate (APR)
The APR shows the true, total cost of borrowing and allows you to compare offers from different lenders. The APR takes into consideration all payments, such as interest payments, repayment of capital, all costs and any fees based on projections for the payments applicable during the term of a mortgage.

Standard Variable Rate (SVR)
This is the standard variable mortgage interest rate that is offered by all lenders. It is usually the rate that customers revert to after a fixed, capped or discount period ends. The rate will usually change in line with the Bank of England Base Rate but is not linked to it.

Loan To Value (LTV)
Loan to Value refers to the amount you are borrowing compared to the property value.

Annual Rest Loan
This refers to mortgage accounts where interest on the loan amount is calculated on an annual basis.

Monthly Rest Loan
This refers to mortgage accounts where interest on the loan amount is calculated on a monthly basis.

Interest Only Mortgage
These mortgage repayments represent only the interest on the amount that you've borrowed. Although this will be lower than the payments on a repayment mortgage, you will in addition have to make provision to repay the amount you have borrowed at the end of the term.

Repayment Only Mortgage
These payments represent both interest and a portion of the capital owed each month. This means that your outstanding mortgage balance will reduce year on year.

Offer of Advance
Once your mortgage application has been assessed, we will send you an Offer of Advance which will show how much we are prepared to lend and on what terms. A copy of this document will also be sent to your solicitor.

Completion
This is the moment when you can move in to the property.

Exchange of Contracts
This is the stage in England, Wales and N. Ireland at which buyer and seller have legally committed themselves to sale and purchase.

Conveyancing
This is the legal process that effects the transfer of ownership of the property. It deals with obtaining the title deeds from the seller, negotiating and agreeing the contract for buying your home as well as the mortgage deed, which legally charges the property as security for the loan.

Conclusion of Missives
The stage in Scotland where buyer and seller have legally committed themselves to the purchase deal.

Homeowners' Loan
A loan secured on your existing property for any purpose.

Capital Repayment
A lump sum payment to reduce the loan, which has the effect of reducing the term of your mortgage or your monthly repayments.

Gazumping
When another potential buyer puts in a higher offer for the property after your offer on the same property has been accepted.

Stamp Duty
You currently have to pay Stamp Duty if you are moving home and your new home costs more than £125,000. The amount is calculated on the whole purchase price and rises as the price of your home increases.

(Based upon stamp duty rates for tax year 2008/09)

Fixed Rate Mortgage
A fixed rate means that no matter what happens to interest rates, your mortgage interest rate stays the same for an agreed period. However you should note that your monthly commitment could change as a result of other factors; for example changes in insurance premiums.

When the fixed rate period is over, your mortgage will change to a different interest rate. This will usually be either the standard variable rate, or a rate which is linked to the Bank of England Base Rate. The follow on interest rate may be higher or lower than the interest rate you've been paying. If the interest rate is higher, your payments will increase.

An early repayment charge may apply if this type of mortgage is repaid during, or soon after the introductory rate period.

Capped Rate Mortgage
Capped Rate Mortgages are generally linked to the standard variable rate and sometimes are combined with a discounted rate mortgage. Unlike a Discounted Rate Mortgage where interest rates can rise or fall freely, a Capped Rate Mortgage has a ceiling above which the rate you pay will not rise. This ceiling is known as "the cap".

If interest rates go above this ceiling, you won't be affected; however if rates fall, your rate, being variable, will come down. When the capped rate period ends, you will pay the standard variable rate which may be higher than the rate you have been paying. If it is higher, your payments will increase.

An early repayment charge may apply if this type of mortgage is repaid during, or soon after the introductory rate period.

Discounted Rate Mortgage
A Discounted Rate mortgage guarantees that you'll pay a set amount below the standard variable rate for the period of the discount. The standard rate can go up and down, but the discount remains fixed during the agreed period. You will need to budget for an increase in your payments when the discount period ends and the interest rate changes to the standard variable rate.

Discounts, and the period over which they run, vary from time to time. Generally speaking, the shorter the discount period, the higher the discounted rate will be. So, for example, if you opt for a two-year discount, your payments will be reduced for two years, but not by as much as they would be with a one-year discount.

An early repayment charge may apply if this type of mortgage is repaid during, or soon after the introductory rate period.

Tracker Mortgage
A Tracker Mortgage is a variable rate mortgage where the interest rate is linked directly to the Bank of England Base Rate. So whenever the Bank of England Base Rate changes, the rate on the tracker mortgage is guaranteed to change by the same amount.

Cashback Mortgage
These are generally variable rate mortgages where the benefit of lower payments given in discounted rate mortgages are converted into a single lump sum, which you receive when you take out the mortgage.

An early repayment charge may apply if this type of mortgage is repaid during, or soon after the introductory rate period.

Application Fee and Booking Fee
Some of our mortgage products contain an Application Fee. Details of the fees will be shown on the illustration of any new mortgage
If a Fee is payable on the product you've chosen it may be added to the amount you want to borrow unless you tell us otherwise when you submit your mortgage application.

If a Fee is added, you will pay interest on this additional amount throughout the life of your mortgage.

Booking Fees are payable when you submit your application and cannot be added to the amount you want to borrow. Not all products require you to pay a Booking Fee. They are normally only payable on products which are likely to sell out quickly and where it is necessary to reserve (or "book") the funds in advance to avoid disappointment.

Higher Lending Charge
A Higher Lending Charge is something which you may have to pay if you are borrowing more than 75% of the purchase price or property valuation, whichever is the lower. On some of our mortgage products you will only have to pay a fee if you are borrowing more than 90%.

The fee varies according to the amount you are borrowing: the higher the loan to value ratio, the higher the fee that is charged. Not all lenders charge such a fee.

Your home may be repossessed if you do not keep up repayments on your mortgage.

For mortgages we are normally paid by commission from the lender. As an alternative we can work on a fee basis of £500 and commission received from the lender will be rebated back to you.

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Looking at your options, realising the potential of you policy

Have you recently received a review from your endowment provider that has given you reason to be concerned? Unfortunately all too many endowments are now not on target to repay the mortgage, using the guide lines that have been set down by the Financial Services Authority.

As we are not tied to any one insurance company, we are in a position to act on your behalf to review any projected shortfall on your endowment and to give you advice on the best course of action to resolve the problem.

If you feel that you have been mis-sold your endowment then the website produced by the consumer association ‘which?’ at www.which.net/endowmentaction/ provides some useful information and can talk you through ‘how to make a claim’.

If you have made a claim and you would like to make sure that the claim is fair, then please contact us. If you would like to find out further information on your rights as a consumer regarding your endowment, then click on www.fsa.gov.uk/consumer.

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