Mortgage Jargon Buster

The mortgage world has lots of terminology and acronyms, with our handy guide we'll help you understand what they all mean

APRC – stands for Annual Percentage Rate of Charge. A lender is always required to quote the APRC when advertising a loan or borrowing rate. It is a standard interest rate calculation designed to reflect the total amount of interest that will be paid over the entire period of the loan. It must also take into account charges which the borrower has to pay in order to obtain the loan and during the loan period (such as lenders fees, valuation and legal fees etc). The purpose of APRC is to help you compare the true cost of borrowing

Additional borrowing – also called a further advance. This is when an existing mortgage customer wishes to borrow more.

Arrears – an account is classed as being in arrears when the payment date has passed and no payment has been made.

BBR – this stands for bank base rate and is the rate set by the Bank of England.

Daily interest – interest is calculated on the total debt outstanding on a daily basis. This means you only pay interest on what you owe.

Equity – the difference between a property’s actual value and the mortgage amount outstanding on it.

ERC – this stands for early repayment charge.

First time buyer – a person buying their first property.

Next time buyer – a person selling one property and buying another.

Over 55’s, restricted properties – property that can only be owned by someone over 55 years of age.

Higher lending charge – this is also referred to as an HLC. It is a fee charged by a mortgage lender where the amount borrowed exceeds 75% of the value of the property. This fee is used by the society to purchase an insurance policy to protect itself against the loss incurred in the event of a borrower defaulting on their mortgage. Please contact the Society for further details.
ICR – Interest Coverage Ratio.

Interest rate – this is the rate at which the lender calculates interest they charge the borrower for the mortgage expressed as a percentage.

Insurance – buildings insurance is compulsory on all freehold properties. Please note that if you do not maintain buildings insurance cover on your property, you will be in breach of your mortgage conditions. The Society’s interest must be noted on your buildings insurance policy.

Interest only – with an interest only mortgage you only pay the interest on the amount borrowed, so the sum you owe does not change for the life of the mortgage. It is your responsibility on maturity to repay the capital owing.

ESIS – this stands for European Standardised Information Sheet and it requires all lenders to set out the details of all associated rates and fees for a mortgage product in the same format to enable customers to easily compare products.

Legal costs – these are the fees you pay to a solicitor when you take out a mortgage.

LTV – this stands for loan to value and represents the amount you are looking to borrow as a % of the value of the property. For example if the purchase price is £100,000 and you take out a £75,000 mortgage the LTV is 75% (£75,000/£100,000 = 75%).

Overpayment – when a borrower chooses to make a larger monthly payment on their mortgage than is stipulated under the mortgage terms. This enables you to pay off your mortgage earlier or make underpayments in the future (conditions apply).

Part & Part mortgage – this is a mortgage that is partly on repayment and partly on interest only.

Permanent resident – to be considered a permanent resident, you must have indefinite leave to remain in the UK and you should consider the UK as your home.

Payment holiday – if you have overpaid enough on your mortgage you may be able to stop making monthly payments until you have used up the overpayments (conditions apply).
Remortgage – when you transfer your mortgage from one lender to another

Repayment mortgage – also called capital and interest, each month you repay some of the capital borrowed along with an amount of interest.

SVR – stands for standard variable rate.

Underpayments – if you have overpaid on your mortgage you may be able to make payments that are less than your stipulated monthly payment (conditions apply).

Valuation fee – when you apply for a mortgage you will need to pay a valuation fee to cover the cost of valuing your property. The valuation fee is payable on application and is non-refundable if the valuation is carried out. The valuation is very basic and is carried out for our benefit. We strongly recommend that you have a more thorough survey undertaken, such as a homebuyers report. This will tell you about the quality and condition of the house you want to buy. This can be arranged through ourselves (please contact the office for more information).