The ‘AER’ stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year.
These fees are charged on certain products, usually loans where a special interest rate applies e.g. fixed rates.
The term 'in arrears' is used to describe a borrower who has failed to keep up their monthly mortgage repayments.
APRC is the Annual Percentage Rate of Charge, a figure designed to allow customers to be able to compare different mortgage products. It takes into account not just the interest rate, but any charges associated with the mortgage (such as valuation fees, arrangement fees etc.)
A draw down facility is useful when you know you may need to borrow further money in the future. The total amount is agreed in advance and when you need the money you can take it quickly without the hassle of making a new application.
A Direct Debit is an instruction from a customer to their bank or building society authorising an organisation to collect varying amounts from their account, as long, as the customer has been given advance notice of the collection amounts and dates.
This may be charged if all or part of your mortgage is paid off during a period of discount or fixed rate. Details of any early repayment charge will be given in product literature, the Key Facts Illustration and your mortgage offer.
If your house is worth more than the mortgage on it, the difference is known as the "equity". For example, if your outstanding mortgage is £70,000 and your home is worth £100,000 you have equity of £30,000.
With an interest-only mortgage, the payment you make each month comprises just the interest you owe for that month. So you are not paying off any of the capital you owe. The loan is typically paid off at the end of the term with a maturing investment such as an endowment policy.
Initial Disclosure Document
Given to you at the beginning of the mortgage interview, this document clearly sets out the scope of the service that will be provided and the basis of any charges for it.
Loan to value 'LTV' is the amount of your mortgage shown as a percentage of the value of your property. For example, an £80,000 mortgage on a house worth £100,000 would have a loan to value of 80%.
A Lasting Power of Attorney (LPA) is a legal tool that allows you to appoint someone to make certain decisions on your behalf
The process by which your mortgage is brought to an end when you have paid back all of the loan, interest, costs and other charges which are due on it. The lender then has no further claim on your property.
Moving a mortgage from one lender to another, without changing property.
A period during which loan repayments are suspended. During this period interest still accrues. Payments are generally adjusted afterwards so that the loan is still repayable within the original time period.