Remortgage Help & Advice
If you are having trouble understanding some of the different types of mortgage, please browse through our glossary of terms below:
- 100% Mortgage: This is when the lender provides all the money required and there is no requirement for a deposit to be paid.
- Buy-to-Let Mortgage: A buy-to-let mortgage is a specialist mortgage that the lender provides to enable the borrower to buy a house to rent out to tenants.
- Capped Rate Mortgage: A capped rate mortgage is a loan that will not to rise above a specific rate within the give period time stated at it’s outset.
- Cashback Mortgage: A cashback mortgage is a mortgage where the lender pays out a sum of money (either a flat figure or as a percentage of the loan) to the borrower at the outset of the mortgage on completion of the legal paperwork.
- Current Account Mortgage: A current account mortgage is a highly flexible mortgage , by combining it with a current account. The current account balance is then set against the mortgage balance and the interest is only charged on the net amount outstanding. This way the interest payments are reduced.
- Debt Consolidation Mortgage: A debt consolidation mortgage collates all your existing debts together, like your present mortgage, HP, credit cards, secured loans, bank loans etc and combines them by means of a re-mortgage. Usually spreading your total debts over a longer period and in so doing reducing your monthly outgoings.
- Direct Mortgage: A direct mortgage is often the term used to describe a mortgage arranged by a lender over the phone.
- Equity Release Mortgage: An equity release mortgage is designed to allow the home owner to release some of the equity from his or her home. The equity is the difference between what the house is worth and what is owed on it, which due to inflation can often be a substantial amount. Sometimes an Equity Release Mortgage can be called a home income plan or home reversion scheme. The funds raised can be taken as a lump sum, as income or as a mixture of both.
- Fixed Rate Mortgage: A fixed rate mortgage is a mortgage that charges the same interest rate, which is set at the outset, for the life of the mortgage. The interest rate is guaranteed never to increase no matter how much general interest rates raise.
- Flexible Mortgage: Among other things a flexible mortgage could allow you to pay off your mortgage early. It could also provide you with the ability to take payment holidays or vary your monthly repayments, such as overpaying, when you have extra funds available or underpaying for a time when or if finances get tight.
- Discounted Rate Mortgage: A discounted rate mortgage, or discount mortgage, is a mortgage were the lender reduces the interest rate by a set percentage for a set period, after which the interest rate raises to the lenders standard variable rate.
- Guarantor Mortgage: A guarantor mortgage is a loan also guaranteed by someone other than the borrower, it could be an individual, a parent, friend or relative for instance, or a company or organisation. The guarantor is responsible for payments if the borrower defaults on the mortgage.
- Interest Only Mortgages: With an interest only mortgage you pay only the interest, none of the capital is repaid until the end of the loan and therefore the amount outstanding remains constant throughout. The monthly mortgage repayments only pay the interest being charged. Interest only mortgages are tied to investments such as PEP’s, endowment policies and personal pensions which are designed (but not guaranteed) to cover the original loan amount at the end of the loan term.
- Lifetime Mortgage: A lifetime mortgage,or retirement mortgage, is very similar to equity release mortgage. They are often taken out by people over the age of 60. There are no monthly repayments and interest is rolled up. When the property is sold (usually on death), the full amount is paid off. Ownership of the property is retained until it is sold for as long as you live in it.
- Offset Mortgage: This is were all a persons accounts with the lender, like their mortgage debt, savings account and current account are aggregated for the purposes of interest calculation. This flexible mortgage allows the borrower to keep their separate accounts, however, all balances are taken into consideration and interest is only charged on the net outstanding amount, resulting in the interest charges being reduced.
- Payment Holiday Mortgage: See Flexible Mortgage. Please note payment holidays are only usually available where mortgage overpayments have previously been made.
- Pension Mortgage: A pension mortgage is a type of interest-only mortgage where mortgage payments are combined with payments into your personal pension fund. They are designed to mature on retirement.
- Portable Mortgage: A portable mortgage is where, provided there is sufficient equity, a borrower can transfer his mortgage to another property without any changes to the terms and conditions.
- Repayment Mortgage: A repayment mortgage is where all the interest and capital outstanding are repaid, in their entirely, by monthly instalments, over the full term agreed
- Retention Mortgage: A retention mortgage is taken out usually when repairs or renovations are required to be carried out to the property before the full loan can be advanced to the lender. The retention is the amount the lender holds back until the stipulated repairs have been carried out.
- Second Mortgage: A second mortgage, or secured loan, is a mortgage taken out on a property in addition to the mortgage initially/originally taken out on it.
- Self-Certification Mortgage: Self-certification mortgages can range across all types of mortgage, from fixed rates, flexible, interest only and discount mortgages. They are designed for people who have a problem proving their income and allow borrowers to state their own income instead of offering payslips or accounts.
- Standard Variable Rate: Standard variable rate is the normal ‘none promotional’ rate that the lender determines at their own discretion.
- Sub-Prime Mortgage: Or adverse credit mortgage (sometimes know as a bad credit mortgage) is a loan given to those with poor credit history. Usually the borrower would have had credit problems such as County Court Judgements due to non payments of outstanding debt, or arrears (payments that have not been made by the due date), possibly an IVA (individual voluntary arrangement that allows an individual to avoid bankruptcy and make maximum possible restitution to creditors), or defaults (failure to meet the terms of a loan by not paying the interest or capital due), or bankruptcy or repossession problems.
- Tracker Mortgage: A tracker mortgage, is a variable mortgage, it has an interest rate that follows the Bank of England’s, it is either above or below the banks base rate by a set percentage. Your monthly mortgage interest payments go up when the base rate goes up and go down when the base rate goes down