A

AER
The ‘AER’ stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year.
Arrangement fee
These fees are charged on certain products, usually loans where a special interest rate applies e.g. fixed rates.
Arrears
The term 'in arrears' is used to describe a borrower who has failed to keep up their monthly mortgage repayments.
APRC
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.)

B

base rate
The main interest rate in the economy, set by the Bank Of England, upon which others rates are generally based.

D

draw-down facilities
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.
Direct Debit
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.

E

Early repayment charge
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.
Equity
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.

F

Further advance
An additional loan secured against your property. For example to pay for home improvements.
Faster Payment
Introduced in 2012, The Faster Payment system delivers electronic payments to a destination account quickly, typically the same day but at most the working day following the day the payment was made.

G

Gross
The ‘gross rate’ is the contractual rate of interest payable before the deduction of income tax at the rate specified by law.

I

Interest only
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.

L

LTV
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%.
LPA
A Lasting Power of Attorney (LPA) is a legal tool that allows you to appoint someone to make certain decisions on your behalf

N

Net
The ‘net rate’ is the rate of interest which would be payable after allowing for the deduction of income tax at the specified rate.
Negative equity
Where the mortgage balance exceeds the value of the property.

O

Overpayments
Voluntary payments made in additional to your normal monthly mortgage payments.
Offset
Mortgage interest is charged on the difference between the amount owed on a mortgage and the balance in a linked savings account. This can save a significant amount of interest over the term of a mortgage without the need to give up access to your savings should it be needed

R

Redemption
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.
Remortgage
Moving a mortgage from one lender to another, without changing property.
repayment holiday
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.

S

Standing Order
An instruction from a customer to a bank or building society to pay a regular specified amount to another account.

T

Tracker
This relates to products with an interest rate that follows the Bank of England's base rate.
Tax Free
Tax Free means that interest is not subject to income tax

V

Vendor
Another name for the person selling the property you are buying.