Mortgage & Remortgage Glossary
A fee which is sometimes payable to the mortgage lender when you opt for a special deal, such as a capped, discounted, or fixed rate mortgage.
Base Rate Tracker
See Tracker Mortgage.
Capital & Interest Mortgage
See Repayment Mortgage.
Capped Rate Mortgage
A mortgage where the interest rate is capped at a certain level for a set number of years. The interest rate can go up and down, but is guaranteed not to exceed this level during the capped rate period.
A mortgage which gives you a cash lump sum on completion.
Discounted Rate Mortgage
A mortgage where you get a discount on the interest rate during the initial special offer period.
Early Repayment Penalty
See Redemption Penalties.
See Interest-Only Mortgage.
Fixed Rate Mortgage
During the fixed rate period, the interest rate on this type of mortgage stays the same, regardless of changes in the Bank of England base rate. This means your monthly mortgage repayments are the same each month even if interest rates go up or down.
A flexible mortgage allows you to make overpayments and take payment holidays. These can be especially attractive for self-employed borrowers whose income may fluctuate throughout the year.
With an interest-only mortgage, your monthly mortgage payment only covers the interest on the loan. At the end of the mortgage term, you still owe the mortgage lender the original amount you borrowed. Separate monthly payments are made to an investment vehicle (typically an endowment) in the hope that the investment will have grown enough to repay the mortgage at the end of the mortgage term. These mortgages were popular in the 1980s and 1990s, but fears of endowment shortfalls have meant that most people now opt for repayment mortgages.
A type of flexible mortgage where you can use the money in your savings account to reduce the amount of interest you pay on your mortgage via offsetting. This can mean you pay off your mortgage quicker.
If you repay your mortgage early, or switch lenders, whilst on a special mortgage deal, you may have to pay a redemption penalty to the mortgage lender.
Taking out a new mortgage without moving house. People often take out a remortgage when they wish to switch to a cheaper mortgage or release equity that has built up in their property.
With a repayment mortgage, part of the amount you pay each month covers the interest on the loan and part goes towards repaying the mortgage capital.
Standard Variable Rate Mortgage
The interest rate on a standard variable rate (SVR) mortgage can go up or down during the course of the loan. Sometimes, the rate will remain unchanged for months at a time, but at other times it may fluctuate from one month to the next. The SVR charged by mortgage lenders is determined mainly by the Bank of England base rate, which is reviewed once a month. When the Bank of England changes the Base Rate, mortgage lenders will usually (but not always) adjust their SVR up or down accordingly.
When you have a tracker mortgage (also known as a base rate tracker mortgage) the interest rate is guaranteed to move up and down in line with the Bank of England base rate. Consequently, it will always be a set number of percentage points above (or sometimes below) the Bank of England’s base rate.
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