International mortgage glossary

This is when a homeowner takes out extra funds against their existing mortgage, using the equity they’ve built up in the property. It’s sometimes referred to as “releasing equity”.

APR stands for Annual Percentage Rate of charge. It shows the overall cost of borrowing and is used to compare different loan or mortgage offers. The APR includes the interest on the loan as well as other charges, such as arrangement fees.

An arrangement fee is charged for some mortgages. It covers the cost of setting up the mortgage and can vary between lenders. Your mortgage manager will explain the details.

The Bank of England Bank Rate is the UK’s key interest rate, set by the Bank of England. It influences the rates charged on loans and mortgages, as well as the interest paid on savings. Tracker mortgages usually follow this rate, adding a set margin on top.

This is a way of repaying your mortgage where each monthly payment covers both the interest charged and part of the original loan amount. Over time, this reduces your balance until the mortgage is fully paid off.

An early repayment charge is a fee you may have to pay if you repay all or part of your mortgage within a set period, usually during a fixed or discounted rate deal. The amount varies by mortgage and is detailed in your Mortgage Rate sheet and offer letter.

This is the price you expect to pay when buying a property or the amount you believe it could sell for.

Equity is the difference between your property’s current value and the amount you still owe on your mortgage. As you pay down your mortgage, your equity in the property increases.

A fixed-rate mortgage has an interest rate that stays the same for an agreed period, set by the lender. This means your monthly payments won’t change during that time, regardless of what happens to wider interest rates.

This means the interest on your mortgage is worked out every day based on your outstanding balance. Other mortgages may calculate interest weekly, monthly, or yearly.

An interest-only mortgage is a repayment option where your monthly payments cover only the interest on the loan, not the original amount borrowed. You’ll need an approved repayment plan in place to pay off the full balance at the end of the term.

The interest rate is the percentage your lender uses to calculate how much interest you’ll pay on your mortgage. For example, if your rate is 5%, then 5% of your outstanding mortgage balance will be charged as interest over a year.

There are two main types of mortgage interest: fixed and variable. A fixed interest rate stays the same for an agreed period, so your monthly payments may not change. A variable interest rate can go up or down, which means your payments may change over time.

Loan to Value (LTV) is the percentage of a property’s value that you borrow as a mortgage. For example, if a property costs £100,000 and your mortgage is £80,000, the LTV is 80%. The maximum LTV you can access depends on factors such as your circumstances, the property, the mortgage type, and the amount you borrow.

A lump-sum payment is a one-off amount you pay towards your mortgage to reduce the outstanding balance more quickly. Check your terms and conditions first, as you may need to pay an early repayment charge.

Your monthly repayment is the amount you pay your mortgage lender each month. It’s calculated based on how much you borrowed, your repayment type, and the interest rate on your mortgage.

The mortgage term is the length of time you agree to repay your mortgage, usually ranging from a few years up to 25 years or more.

An overpayment is when you choose to pay more than your agreed monthly mortgage amount. This can help you reduce your balance and pay off your mortgage sooner.

Porting is when you transfer your existing mortgage to a new property, often when you move home. Check your mortgage terms and conditions first, as not all mortgages are portable.

Remortgaging is when you switch your mortgage to a new lender or agree a new deal with your current lender, usually to get a better rate or change your terms.

A repayment vehicle is the plan or product you’ll use to pay off the full mortgage balance (the capital) at the end of an interest-only mortgage. It’s important to make sure your chosen plan will provide enough funds and be in place when the final payment is due.

Switching is when you move to a new mortgage deal with the same lender. For example, you might switch from a fixed-rate to a tracker-rate when your fixed period ends.

A tracker-rate mortgage has an interest rate that moves in line with another rate, usually the Bank of England bank rate, plus a fixed margin set by your lender. This means your payments can go up or down as the base rate changes. If the combined rate ever falls below zero, your interest rate will be set at 0% until it rises above zero again.