Glossary

We have created the following glossary of mortgage and protection terms, words, products and phrases to help you understand your options. If you have any questions, please contact our team. We’re here to help.

Mortgage Glossary

FIXED RATE

This is a mortgage where the interest rate is fixed at the start of the term for a period of years. During that time, the monthly payment will not change, provided you do not miss any of the payments or pay less than the amount due to the lender.

TRACKER

A tracker mortgage is a type of variable rate mortgage. It follows the Bank of England base rate during a specified period, so your repayments can vary – go up or down.

The interest rate you pay on tracker mortgages is variable and is an agreed percentage above the Bank of England's base rate. As the base rate rises and falls, your interest rate will track these changes, and this will affect your monthly payments accordingly.

DISCOUNTED RATE

A discounted mortgage is a mortgage where the interest rate is set a certain amount below the lender's Standard Variable Mortgage rate (SVR). This could be for either a set period or the whole of the mortgage term. The SVR is the interest rate set by your lender, which it can raise or lower by any amount at any time. However, a discounted mortgage is a type of variable-rate mortgage, meaning the amount you pay could change from month to month.

OFFSET

An offset mortgage is a type of mortgage that is linked to a savings account taken out with the lender. The money in your savings isn’t used to pay off your mortgage. Instead, it’s used to lower the total interest you’ll be charged on your repayments each month.

This can either make your mortgage repayments cheaper or reduce the term of your mortgage, but you won’t earn any interest on those savings your mortgage is ‘offset’ against.

Lenders ‘take away’ the amount in your savings account from how much you owe on your mortgage. You’ll only pay interest on what’s left.

STANDARD VARIABLE RATE (SVR)

A Standard Variable Rate (also known as Standard Mortgage Rate or SMR) is the standard interest rate offered by a mortgage lender. It’s the rate your mortgage reverts to after the end of the initial deal unless you choose another deal with the lender or remortgage to a new lender.

REPAYMENT MORTGAGE (CAPITAL & INTEREST)

A capital and interest mortgage (often called a Repayment Mortgage) is the most common type of mortgage being offered at the moment. With this type of mortgage, you’ll make

monthly repayments for an agreed period of time (known as the ‘term’ of the mortgage) until you’ve paid back both the capital and the interest.

This means that the amount you owe will get smaller every month, and as long as you keep up the repayments, your mortgage will be repaid in full at the end of the term.

INTEREST ONLY

When you take out an interest-only mortgage, your monthly payments pay back the interest on what you’ve borrowed rather than the sum itself.

At the end of the term, you pay back the full amount outstanding in one lump sum.

PORTING

This feature allows you to move the product you currently have over to a new property if you move house. The interest rates and monthly payments will remain the same after the house move although any additional money you borrow to purchase your new home will be subject to the rates and lending criteria available at the time you apply for the mortgage to be ported.

EARLY REPAYMENT CHARGE (ERC)

This is a charge made by a lender if you repay all your mortgage or part of it before the date at which the initial deal ends. The amount of the charge can be found in your illustration and will vary depending on how early in the term you make the repayment.

FIRST TIME BUYER

A person is generally classified as a first-time-buyer if they're buying their only or main residence and have never owned a freehold or have a leasehold interest in a residential property in the UK or abroad

REMORTGAGE

Remortgaging is the transfer of a mortgage from one lender to another. You continue to live in the same house, but your monthly payments are made to a different lender. The purpose of Remortgaging is often to obtain a more favourable interest rate when your current deal has expired, but it may also be used to raise additional funds – for home improvements, to repay other debts etc.

HOME IMPROVEMENT FINANCING

A home improvement loan where the money raised by increasing your mortgage borrowing can help you fund improvements to your home and potentially increase its value.

PRODUCT TRANSFER

A product transfer mortgage is a remortgage with your current mortgage lender. It involves switching to a new mortgage deal with them when your current deal runs out.

LOAN TO VALUE (LTV)

LTV or Loan-to-Value is a ratio of the size of your mortgage loan compared to the value of the property and expressed as a percentage.

ANNUAL PERCENTAGE RATE OF CHARGE (APRC)

APRC shows you, as a percentage, the annual cost of your mortgage over its lifetime. It brings together all the charges (such as fees) plus the interest rate on your initial deal and the interest rate you’ll be charged when your deal expires.

GUARANTOR MORTGAGE

A guarantor mortgage (also known as a family-assisted mortgage) is a mortgage deal where another person agrees to take on responsibility for your repayments in the event that you can’t pay. That person is known as the ‘guarantor’ and is usually a family member or close friend of the mortgage applicant.

DEBT CONSOLIDATION

Debt consolidation is the act of taking out a single loan to pay off debts. You can use a secured or unsecured loan for debt consolidation.

HMO MORTGAGES ( Homes of Multiple Occupancy )

HMO mortgages are a type of buy-to-let mortgage that is used to buy a property that will be rented to multiple tenants from different households - otherwise known as HMO properties.

BUY TO LET ( BTL ) MORTGAGES

Buy-to-let mortgages are designed to help you buy a property that you intend to rent out to other people rather than to live in. The amount you can borrow usually depends on the rental income you expect to earn from tenants, although we might consider other income in some circumstances

BRIDGING FINANCE

A bridging loan is a short-term loan used to help you ‘bridge the gap’ when you want to buy something, but you’re waiting for funds to become available from the sale of something else

RIGHT TO BUY MORTGAGES

Right to Buy is a government scheme that lets you buy your home at a substantial discount if you're a council tenant. The policy was introduced by Margaret Thatcher in the 1980s and

remains popular. You might even be able to use your discount as a mortgage deposit so you can buy your home with less savings.

HELP TO BUY REMORTGAGES

When you remortgage a property that has a Help to Buy loan on it, to either borrow funds to pay off the government loan or to continue with your equity loan.

RATE SWITCHING

Rate switching is the process of switching all (or part) of your mortgage balance onto a better rate with your current lender.

SHARED OWNERSHIP MORTGAGES

Shared ownership is where you own a percentage of a property, and a housing association or the government 'owns' the rest, renting it to you at a reduced rate. This often means a lower deposit is needed to buy a house.

ADVERSE CREDIT MORTGAGES

There are mortgages designed for people with a poor credit history, and some lenders specialise in offering these. These are known as bad credit mortgages, adverse credit mortgages, or subprime mortgages.

PARENT / FAMILY ASSIST MORTGAGES

A mortgage product enables borrowing for the purpose of purchasing a property with the help of family members. The mortgage enables the utilisation of family savings to enable the purchase of a house and can be suitable either for first-time buyers or existing homeowners looking to move.

JOINT BORROWER SOLE PROPRIETOR MORTGAGES

A Joint Borrower Sole Proprietor mortgage gives people who don't quite have enough income or the financial capacity to get the level of borrowing needed to buy their home. Additional borrowers are then added to an application, using their income/s to help boost borrowing capacity.

The additional person would be jointly responsible for ensuring mortgage payments are met, but they would not own the property themselves.

SECOND CHARGE BORROWING

A second-charge mortgage is a secured loan that uses the capital (or equity) in your home as collateral. In other words, it's based on the difference between the value of the property and the amount you owe on your first mortgage.

COMMERCIAL LENDING

A commercial loan is done between a bank and a business, used to fund operating costs and capital expenditures. Many commercial loans require collateral, such as property or equipment.

RETIREMENT INTEREST-ONLY MORTGAGES / OVER 55 YEARS OLD MORTGAGES

A retirement interest-only mortgage is only available on your main residence and is very similar to a standard interest-only mortgage, with two key differences. The loan is usually only paid off when you die, move into long-term care or sell the house.
An age 55+ Mortgage is basically a halfway house between a standard mortgage or remortgage and a lifetime mortgage equity release product. It is an interest-only mortgage where you pay the interest on the loan each month and retain ownership of your property.

PROTECTION GLOSSARY

LIFE INSURANCE

Insurance that pays out a sum of money on the death of the person insured. The policy is usually taken out for a set number of years (the term of the policy). After that, the policy ends, and no money would be paid out if the insured person dies after the policy ends.

LEVEL TERM ASSURANCE (LTA)

LTA (level term assurance) is an insurance policy that provides a set sum assured (the amount of money your beneficiaries will receive upon your death) if you die within a defined period (the term). The word level is used because the sum assured remains the same. The word term is used because the policy covers you for a set length of time.

DECREASING TERM ASSURANCE (DTA) - MORTGAGE PROTECTION

This is generally the cheapest form of life cover. The sum assured decreases each year that the life assured lives, usually on a fixed scale, until at the end of the term, the amount is zero.

INCREASING TERM ASSURANCE (ITA)

Increasing term insurance, also known as index-linked life insurance, is a term life insurance policy that keeps on rising in value over time. The increasing term insurance helps your policy maintain its buying power and doesn’t erode in value due to inflation.

FAMILY INCOME BENEFIT (FIB)

Family income benefit is a type of life insurance policy that pays out a regular monthly income (rather than a lump sum) to your family if you die within the policy's term. The monthly income is paid for the remainder of the policy term.

CRITICAL / SERIOUS ILLNESS COVER (CIC)

Critical illness cover is a type of insurance that pays out a tax-free lump sum if you're diagnosed with a critical illness that meets the policy definitions during the policy term. The policy does not cover every illness, and illnesses that are covered may have limits regarding how severe the illness must be to make a claim.

PRIVATE MEDICAL INSURANCE (PMI)

Private Medical Insurance (PMI) is designed to cover the cost of private medical treatment for acute conditions that start after your policy begins. It may cover a range of different options, including choice of hospitals, diagnostic tests and outpatient care.

WHOLE OF LIFE COVER

Whole-of-life insurance is life insurance that covers you for the entirety of your life rather than for a set term. It means your family will receive a payout however long you live, as long as you keep paying the premiums.

INCOME REPLACEMENT PROTECTION

Income Protection pays out a monthly sum to replace part of your income if you are unable to work due to illness or injury. It continues to pay out until you have recovered or until your retirement, your death, your policy ends or the limited claim period on your policy ends (whichever is sooner).

GUARANTEED OVER 50’s COVER

An over-50s life insurance plan is a type of policy for people usually between the ages of 50 to 85. You pay a fixed monthly premium, and the policy guarantees to pay out a cash lump sum – known as a 'payout' or 'sum assured' – to your loved ones when you die.

DEFERRED PERIOD

This is the period of time you are prepared to wait before your income protection policy starts to pay out if you make a claim. You can choose your deferred period when you take your policy out – you can usually choose from as little as 1 day up to 52 weeks. Some policies may allow even longer than 52 weeks.

OWN OCCUPATION

Your plan would pay out should you suffer an injury or sickness that prevents you from working in your own occupation.

ANY OCCUPATION

Your plan would pay out should you suffer an injury or sickness that prevents you from working in any occupation, including those that may not be your usual job.

WAIVER OF PREMIUM

This is an additional benefit which can be added to your cover for an additional cost. It ensures your insurance remains intact if you become incapacitated by illness or injury and are unable to pay your monthly premiums.

TOTAL & PERMANENT DISABILITY

This cover is commonly offered on life insurance and critical illness insurance policies. It pays out an agreed sum of money if you have an illness or injury that means you’re permanently incapacitated.

TERMINAL ILLNESS BENEFIT

Many life insurance policies include terminal illness benefits. This means the insurer would pay out if you’re diagnosed with a terminal illness within the policy term and aren't expected to live longer than 12 months. Once the terminal illness benefit has been paid, the life insurance policy ends and won’t pay out when you die.

FRACTURE COVER

Fracture cover is there when your customer has an unexpected injury, like a slip on the stairs, a car crash or a fall outdoors. It’s there to help with extra costs an injury can cause, such as childcare, travel costs or equipment for mobility.

BUILDINGS & CONTENTS INSURANCE

Buildings and contents insurance is placed under the bracket of home insurance. It is a combined insurance that will cover or replace any damage that might occur to the house or its contents, including loss

INDEXATION

Indexation is a facility offered by many life insurance providers which helps you maintain the buying power of the potential benefits payable. With indexation, normally, the premiums (and therefore the benefits payable) are linked to one of the indicators of inflation. This means that your premiums may increase over time, but the benefits you could receive if you claim will also increase.

TRUST

A trust is a legal agreement which enables the ‘settlor’ (the person setting up the trust) to specify what happens with the proceeds from their insurance policy. Trustees are appointed, and they ensure that any money paid out from the policy goes to the people you would want it to go to (your beneficiaries).

BARE TRUST

A bare trust is a basic trust in which the beneficiary has the absolute right to the capital and assets within the trust, as well as the income generated from these assets.

DISCRETIONARY TRUST

A trust in which the trustees have the discretion to decide how much to pay out, to whom and when to pay. This is often used when the beneficiaries are too young to deal with their own money.

FUNERAL PLAN COVER

With funeral insurance, like over 50s life insurance policies, you pay a fixed monthly amount, and then when you die, your family receive a fixed cash amount. The amount you pay each month is based on how much you want your family to receive when you die, so if you want a large payout, you will pay higher premiums. The intention of the payout in the event of a claim is to cover the cost of a funeral.

LANDLORDS INSURANCE

Specifically designed to protect landlords from potential issues with tenants and problems that can occur, particularly with rental properties.

RENT PROTECTION

Rent guarantee insurance is a type of insurance policy designed to protect landlords from financial losses incurred by tenants failing to pay their rent. A policy can cover missed rental payments and legal fees accrued due to having to evict the tenant from the property.

FAMILY LEGAL PROTECTION

Family legal protection (FLP) is a type of legal expense cover that you can get with your home insurance. It protects you against the costs of being sued or having to make a claim against someone else for problems like Property disputes. Employment issues.

PRIVATE MEDICAL COVER

Private Medical Insurance (PMI) is designed to cover the cost of private medical treatment for 'acute conditions' that start after your policy begins. PMI is available at a range of different levels of coverage at various premiums designed to meet the needs of different customers.

HOME EMERGENCY COVER

Home emergency cover on your home insurance is for sudden and urgent issues affecting your property or your gas, electricity and water supply, such as: Blocked drains. Boiler breakdowns. Burst pipes.

PERSONAL POSSESSIONS COVER

Personal possessions insurance covers everyday belongings against loss in and outside your home. It's an optional add-on that you can buy with or add to your home insurance policy.

LIMITED COMPANY RELEVANT LIFE COVER

A type of policy that a Limited company can take out to provide life insurance for an individual employee. It's an alternative way employers can provide death-in-service benefits for employees outside of a registered group life scheme.

CHILDREN'S CRITICAL ILLNESS PROTECTION

Child critical illness pays out a lump sum to help support your family if any of your current or future children are diagnosed with a serious condition.