Glossary

Common financial terms

2^nd Charge

This is a second loan, which is secured against a property that already has an existing mortgage in place. It is commonly known as a secured loan or homeowner loan. 

Adverse

A term describing items of credit that have a detrimental effect on a person’s ability to get a loan. 

This will typically include mortgage arrears, defaults, county court judgements (CCJs), bankruptcies, individual voluntary agreements (IVAs), cautions and missed payments on unsecured credit. 

APRC

Annual percentage rate of charge is a calculation that allows a comparison of the cost of mortgage products, including interest and fees over the life of the mortgage. 

The representative APRC is the rate that 51% of customers will achieve, or better.

Binding offer

Final mortgage offer issued by or on behalf of the lender once the application has been approved and all documentation is received and checked.

Consumer buy to let (CBTL)

A BTL mortgage against a property where the owner has no other BTL properties and who has (or close family has) previously lived in the property.

Equity

The difference between the actual value of the property and the outstanding balance of any mortgages secured against the property.

ERC (early repayment charge)

If you choose to settle your loan early, some lenders will ask you to pay an early repayment charge, usually when the loan has a fixed rate of interest in the initial period.  In most cases this is charged as a percentage of the loan. 

Some of our loan products don’t incur any ERCs. 

FCA (Financial Conduct Authority)

The FCA is the regulatory body responsible for supervising and regulating the financial services industry, including the sale of mortgages and loans.

First charge

The earliest dated charge (loan) secured against a property, usually the mortgage.

Interest rate

This is the proportion of the loan that is charged as interest, typically expressed as a percentage of the loan outstanding. 

For example, if your loan attracts an annual interest rate (AIR) of 10%, for each £1,000 you borrow over the first year you would have to pay back an additional £100 in interest.    

Interest rates can be variable, meaning that they can go up or down.  Or they can be fixed for a chosen period, meaning they won’t change during that time. 

Loan to value (LTV)

A commonly used equity calculation, indicating what percentage of the value in a property has been lent against.    

For example: a house is worth £100,000, the mortgage is £75,000.  The LTV is 75% (75,000 / 100,000 = 0.75 *100 = 75%)

Overpayment

A loan that allows you to make extra payments on top of your monthly contractual payment. 

When you make an overpayment, your lender may offer you the option of reducing your future monthly payments, or reducing the term of the loan. 

Portability

If you decide to move and buy a new property during the mortgage term, some mortgage lenders will allow you to take your mortgage product with you, meaning you don’t have to redeem it early avoiding Early Redemption Charges.  Subject to the lender’s usual lending terms and conditions.    

Reflection period

Once your lender has agreed to complete your loan and provided you with a binding offer, you are given a seven day reflection period (like a ‘cooling off’ period) in which you have the opportunity to consider the terms and conditions without pressure, the offer remains binding on the lender but you can choose to accept the offer at any time during the period. 

Remortgage

The process of changing your mortgage product or mortgage provider. 

Unregulated loan

Loan agreement not regulated by the FCA.