| Accident, Sickness and Unemployment cover |
Cover provided by Mortgage Loanguard
which pays your monthly mortgage payment for up to 12 months if you become ill, unemployed
or have an accident. |
| Agreement in principle |
An indication of the likely outcome of a loan application. This is not a formal
offer but includes a credit check with a credit reference agency and an assessment of your
ability to repay the loan amount requested. Once you have been given an agreement in
principle we would make further checks to validate the information you have provided and
check that the house you have chosen is suitable for us to lend against. At that stage we
would then offer you a formal offer of
loan. |
| Arrangement
Fees |
Charged to arrange a loan on certain products. Usually applied to loans where a
special interest rate applies e.g. fixed or capped rates. |
| APR |
Annual
percentage rate of the total charge for credit: this is the standard way (laid down by the
Consumer Credit Act 1974) of working out the true interest rate. By law, the APR has to be
shown by all lenders alongside their quoted interest rates for each mortgage term, to
enable potential borrowers to make comparisons between offers made by different lenders. |
| Buy To Let |
A
mortgage used to buy property which is to be used solely for the purposes of renting out
to a third party. |
| Capped Rate Mortgage |
A loan
where a maximum rate of interest is set at the start of the mortgage. During the capped
rate period the interest rate can fall below the capped rate but will never rise above it.
|
| Capital Repayment |
There
are 2 ways of repaying a mortgage - capital repayment or interest only. With a capital
repayment mortgage, the capital and interest elements of the loan are paid off with each
monthly instalment so that the balance reduces over time. At the end of the mortgage term
the balance will be nil. |
| Capital &
Interest |
Another
term for capital repayment |
CAT Mortgage
(Charges Access Terms) |
A
mortgage that complies with specific guidelines laid down by the government in terms of
the charges applied, the flexibility of the mortgage and the terms applicable to it. |
| Conveyancing |
The
legal process involved when buying or selling property. |
| Daily interest |
If
interest is calculated daily then any payments made to your mortgage that reduce the
balance immediately reduce the amount of interest you pay. If you have a mortgage which
calculates interest monthly or annually you will pay more interest over the term of your
mortgage than you would with daily interest. All Royal Bank mortgages calculate interest
daily. |
| Decision in
principle |
See Agreement in principle |
| Decreasing Term
Assurance |
A life
assurance policy should repay your mortgage if you die during the term. The amount repaid
on this policy reduces over time as the balance of your mortgage reduces. |
| Deposit |
Savings
used as a down-payment on a house |
| Discount Rate |
This
interest rate is discounted from the published bank standard variable rate, or 100%
standard variable rate if applicable, for an agreed period from the start of the mortgage. |
| Early Repayment/ Switching Charge |
A
charge payable of some mortgages to cover administration costs in the event of a loan
being repaid before the due date. |
| Endowment Assurance |
A
life assurance savings scheme that pays out a lump sum at the end of an agreed period. If
the Endowment is linked to an interest only mortgage, the lump sum from the endowment
policy is designed to pay off the outstanding loan at the end of the mortgage term. |
| Endowment Mortgage |
This is
a type of interest only mortgage. Only interest is paid throughout the term so the balance
never changes. The mortgage is designed to be repaid at the end of the term with the
proceeds of an endowment policy. |
| Equity |
The
value of your home minus any outstanding loan. |
| Equity Release |
A
secured loan to release equity in your house for any purpose. |
| First Time Buyer |
A
customer taking out their first mortgage. |
| Fixed Rate |
A
mortgage rate where the interest rate is agreed at the outset and will not change during
the term of the fixed rate, typically 3 or 5 years. |
| Freehold |
A term
which means that you own the property and the land it is situated on. |
| Interest Charges |
The
charges that banks make on a loan, calculated as a percentage of the amount borrowed |
| Interest Only |
There
are 2 types of mortgage, interest only or capital repayment. With an interest only
mortgage the balance of the mortgage stays the same throughout the mortgage term. Interest
and a premium to an investment vehicle are paid monthly. At the end of the term, the
proceeds from the investment vehicle are intended to repay the mortgage. The amount will
depend on the performance of the investment vehicle. If you choose an interest only
mortgage you will be responsible for ensuring that you have sufficient funds available to
repay your mortgage at the end of the term. |
| Individual Savings
Account (ISA) Mortgage |
An
interest only mortgage linked to an Individual Savings Account fund, which is designed to
pay off the loan at the end of the period. |
| Leasehold |
A
system used mainly in England where you would own the property for a set period before
handing back ownership to the freeholder. |
| Legal Fees |
The
fees charged by a solicitor or other qualified individual to carry out the legal work
associated with buying a house. |
| Level Term Assurance |
A life
assurance policy which will repay your mortgage if you die during the term. The amount
that will be repaid is set as the balance of your mortgage at the start of your loan and
doesn't change during the term of your mortgage. |
| Loanguard |
See Mortgage Loanguard |
| Loan to Value (LTV) |
Loan to
Value (LTV) refers to the amount of the mortgage compared to the value of the house (or
purchase price or lower) you are considering buying. For example, a £40,000 mortgage on a
house worth £50,000 would have an LTV of 80%. |
| Maximum Advance Premium |
The
Maximum Advance Premium (MAP) is a charge due on a mortgage with an LTV greater than 90%.
The premium will be charged on the amount of the loan above 75% LTV. The scale charges
are: |
| % LTV |
MAP Rate |
90.01% - 95%
95.01% - 100% |
8.95%
12.00% |
MAP
example:
Based on a mortgage of £50,000 on a property valued at £55,000. The LTV is 90.9% of
valuation so the MAP rate from the table above is 8.95%.75% of the valuation of
£55,000 is £41,250 which is then deducted from the loan amount of £50,000 i.e. £8,750.
This multiplied by the Map rate of 8.95% gives a MAP charge of £783.13.
Note: MAP will be charged (where applicable above) where customers move house and keep
the existing mortgage terms. |
| MIRAS |
This
was a government scheme discontinued in April 2001 that allowed you to claim tax relief on
the interest you paid on your mortgage. |
| Mortgage |
A loan
made against the security of a property. |
| Mortgage Loanguard |
A
payment protection policy that covers your monthly mortgage payments in the event of
accident, sickness or unemployment. |
| Mortgage Rate |
The
standard variable interest rate quoted by all mortgage lenders which normally varies with
the Bank of England base rate. All discounted rates are based on this Mortgage Rate. There
are 2 tiers of Mortgage Rate, standard variable and 100% standard variable. |
| Negative Equity |
Where a
mortgage is greater than the value of the property |
| Offer of Loan |
A
formal document approving the mortgage you have requested and detailing the terms and
conditions that will apply. |
| Payment Break |
An
option on our Flexible Choice Mortgage that
allows you to stop making mortgage payments for up to 6 months. |
| Pension
Plan Mortgage |
A type of interest only mortgage where the loan is designed to be repaid by a
lump sum from a pension plan when you retire. |
| Re-mortgaging |
Moving
mortgage from one lender to another without moving house. |
| Reserve Facility |
An
option available on our Flexible Choice Mortgage
that allows you to release equity in your home when you want to. As a maximum amount is
agreed at the same time as your mortgage, no further application forms or approval are
required before you access the funds. |
| Right-to-Buy Mortgages |
Mortgages
for public sector tenants who qualify to buy their home under the Government's
Right-to-Buy scheme. Most of our mortgages are available under this scheme. |
| Sealing Fee |
A
charge made for the administration work involved in closing your mortgage account. |
| Self build scheme |
A
package for customers who are looking to build their new home themselves. |
| Stamp Duty |
A
charge levied by the government on house purchases over £60,000. |
| Standard Variable
Mortgage Rate |
See Mortgage Rate |
| Survey |
A more
thorough and costly evaluation of the condition and value of a property. Paid for by the
customer. |
| Term |
The
length of time you take to repay your mortgage. |
| Total Amount Payable |
The
Consumer Credit Act requires the Bank to show the 'total amount payable' on quotations for
mortgages. The 'total amount payable' is the total of the mortgage repayments or, in the
case of an interest only mortgage, the interest payable over the term plus the final
capital repayment. It includes any Bank fees, likely valuation fees, an estimate of likely
legal costs and life assurance premiums. |
| Typical example |
An
example of the repayments made by a typical customer for every mortgage type that the Bank
provides. |
| Unemployment Cover |
One of
the options available with Mortgage Loanguard to
protect against redundancy. If you are made unemployed, it will pay your monthly mortgage payments for up to 12 months. |
| Valuation |
An
independent assessment of the value of a property carried out by an approved surveyor.
Paid for by the customer, the valuation is used by the bank to decide how much they are
prepared to lend. Many customers also choose to arrange a more comprehensive survey for their own purposes before they
decide to buy a property. |
| Variable Rate |
This
rate can go down as well as up during the course of your mortgage and is normally based on
The Bank of England Base Rate. |