APR - Annual Percentage rate (%)
The Annual Percentage Rate (APR) represents a measure of the total cost of borrowing and its aim is to allow a fair comparison, between different lenders, of the overall cost of lending.
Bank of England Base Rate (%)
Every month the Bank of England sets the interest base rate (%) in which is the cost of borrowing from the bank. This rises and falls in line with inflation and other financial factors.
Cash back Mortgages
Many lenders offer a cash sum once the mortgage has completed. The sum usually varies according to the size of the mortgage loan.
Capped rate mortgage (%)
The interest rate has an upper fixed limit, known as the cap. The lenders normal variable rate will apply, but will be subject to the capped rate. Should the variable rate exceed the cap, the borrower has the advantage of paying the capped rate.
Discounted Rate Mortgage
This takes the form of a genuine discount off the normal variable interest rate (e.g 2% off for 3 years). It is not a deferment of capital and interest payments.
Fixed Rate Mortgage
The borrower is able to 'Lock in' to a fixed interest ratemortgage payment for a specified period, usually between one to five years. At the end of the period, the rate reverts to the lenders' prevailing variable rate. This schene is popular with first-time buyers and others who want to be able to budget precisley. However, there is often a substantial arrangement fee, and ther may be restructionsor penalties on changing to another lender.
Interest Only Mortgage
In the case of interest only mortgage loan, the monthly payments made to the mortgage lender are solely to pay interest on the loan. NO Capital repayments are made to the mortgage lender during the term of the loan, the capital amount is still outstanding after the end of the mortgage term. The borrower still has the responsibility of repaying this capital amount outstanding.
Libor Rate - London Inter Bank offer Rate
LIBOR rate is the interest rate that the largest international banks charge each other for loans.
Tracker Rate Mortgage
As the name suggests, these mortgages are linked to the base rate set by the Bank of England. The base rate is reviewed once a month and reflects the cost of borrowing from the Bank of England. The Tracker mortgages rate will give the borrower the certainty that their payments will rise and fall in line with the base rate. It should be noted that the lender does charge a premium above the interest base rate.
Remortgage
The amount from an existing mortgage loan amount is taken over by another mortgage lender. Borrowers do this for a number of reasons, to get a better deal or borrowing more for home improvements, debt consolidation or for business purposes.
Repayment Mortgage
The borrower makes a monthly repayments to the mortgage lender, and each monthly amount partly consists of interest and capital repayment. The higher the interest rate(for any given mortgage amount and term), the higher the monthly mortgage repayment. This method of payment is the safest, as it ensure that the mortgage will be repaid at the end of the mortgage term- provided that all mortgage payments are up to date.
Second Charge - Secured Loan
A second charge is an additional loan from a different lender, and secured by a second charge on the property. This means if the borrower defaulted on the repayments, the main mortgage would be paid first out of the sale of the property proceeds. Because the lenders security takes second place the interest rates are generally higher on the second loan – though normally not as high as an unsecured loan.
SVR - Standard Variable Rate (% Interest)
This is the basic method, with monthly payments going up and down without limit as interest rates change. One disadvantage is that the borrowers cannot easily predict the level of future payments, which can cause budgeting problems.
Email: info@selfcertremortgages.co.uk
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