Relationship Managed Service
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Key terms explained
Get up to speed with mortgage terms, ready to chat with our experts in the Channel Islands and Isle of Man.
Additional borrowing
This is when a home owner borrows back some of the money they’ve paid into their mortgage. It’s also known as “releasing some of the equity” of the property.
Annual percentage rate (APR)
APR stands for the Annual Percentage Rate of charge and it’s used to compare loan offers. The APR for a mortgage will include the interest on the loan and other charges e.g. arrangement fees.
Arrangement Fee
This fee is charged on some mortgages as part of the mortgage deal. It covers the work of setting up the mortgage and can vary from lender to lender. Your Mortgage Arranger will talk you through the details.
Bank of England Base Rate
The Bank of England Base Rate is the most important interest rate in the UK. It’s set by the Bank of England and affects interest rates on saving and borrowing. Tracker mortgage interest rates are linked to a margin above this Base Rate.
Capital and interest repayment
This is one of the ways you can repay your mortgage. With this option, your monthly payment pays back both the outstanding balance and the interest on your mortgage.
Early repayment charge
This is the charge you’d pay if you repaid all or part of your mortgage within a certain period of time. This fee varies from mortgage to mortgage. You’ll find it listed in the details on our Mortgage Rate sheet and your offer letter.
Estimated property value
This is the purchase price of the property you’d like to buy or sell.
Equity
This is the difference between your property’s value and what’s left to pay on your mortgage. As you pay off your mortgage, you’ll gain more equity.
Fixed rate mortgage
This type of mortgage has a fixed interest rate that’s been set by the lender. This means your monthly payments will stay the same until an agreed date, no matter what happens to interest rates.
Interest calculated daily
This is when the interest on your mortgage is calculated every day. Other options adjust rates at the end of each week, month or year .
Interest only
This is one of the ways you can repay your mortgage. With this option, you only pay the interest on your mortgage. You won’t pay back the original amount you borrowed. You must have an existing eligible repayment vehicle in place in order to choose an Interest Only mortgage.
Interest rate
This is the rate at which the lender calculates the interest you’ll be charged for your mortgage. E.g. if your rate is 5%, then 5% of your mortgage’s value will be added to the remaining balance.
Interest type
There are two types of interest: variable and fixed. Variable may change month to month. Fixed will stay the same for the whole term.
Loan to value (LTV)
This is how much of the property’s value you would like to borrow. E.g. a £100K property with an £80K mortgage = an 80% LTV.
The maximum LTV we will lend depends on your situation, the property, the type of mortgage you choose and the amount you borrow.
Lump sum payment
This is a one-off payment on your mortgage. You can use this to reduce your outstanding balance a little quicker. You might have to pay an early repayment charge, so check your terms and conditions.
Monthly repayment
This is how much you’ll pay your mortgage lender every month. The figure is based on how much you borrowed, your payment type and the interest rate.
Mortgage term
This the length of time over which you plan to pay back your mortgage.
Overpayment
This is when you choose to make larger monthly payments than outlined in the mortgage terms. You can use this to pay back your mortgage a little quicker.
Porting
This is when you move your current mortgage from one property to another. You might want to do this when you move home. Check your terms and conditions first.
Remortgage
This is when you transfer your mortgage to a new lender or rearrange it with your current lender.
Switching
This is when you move to a new mortgage with the same lender e.g. your fixed rate period ends and you move to a tracker rate mortgage.
Repayment Vehicle
If you have chosen an Interest Only mortgage, by the end of the mortgage, you’ll need to repay the full interest only balance, also known as the capital. The Repayment Vehicle is what you plan to use to repay the balance. You should make sure that your plan will provide enough to repay the balance and importantly, be available when you need to make the final payment.
Tracker rate mortgage
This type of mortgage has an interest rate set at a fixed percentage above the Bank of England Base Rate (BoE). This rate will rise and fall in line with the BoE Base Rate. If your product tracks a rate, such as Bank of England base rate, and that rate falls below zero, we will not change your margin. However if the combination of the tracked rate and the margin means that your interest rate does fall below zero, your interest rate will ‘instead’ be zero, until the combined rate goes above 0% again.