Jargon Buster Our Jargon Buster is here to help explain commonly used mortgage terms. A |B |C |D |E |F |G |H |I |K |L |M |N |O |P |R |S |T |U |V A Accidental Damage Optional insurance cover for your buildings and/or contents which provides protection for accidents that might damage the permanent structure of your home or your belongings. Additional Borrowing (also known as Further Advance) When an existing mortgage customer wishes to increase their mortgage borrowing and which is often used for home improvements but can (subject to lending policy) be used for any purpose. APR (Annual Percentage Rate) A guide to help you compare the cost of different mortgage deals, taking account of interest rates payable (both during the initial product period and after) and inclusive of any fees. Arrears Mortgage payments which have not yet been paid as requested and have become overdue. B Bank Base Rate (BBR) This is the rate which is set on a monthly basis by the Monetary Policy Committee (MPC) of the Bank of England and is the rate that it charges for its borrowing. Base Rate Tracker The interest rate is linked to, but may not be equivalent to, the Bank of England base rate. When there is a change to the Bank of England base rate your mortgage payment rate will reflect this (within 14 days). Building Society A mutual organisation which is owned by its members. Building Insurance An insurance policy which is taken to protect your property against hazards such as fire, flood and subsidence. A buildings insurance is required as part of the mortgage terms and it is the borrowers responsibility to ensure the property is adequately insured for the duration of the mortgage. Buy-to-let mortgage A mortgage that is used for borrowers who wish to purchase a property to rent out. C Capital The amount of money you still owe on your mortgage. Capital and Interest Mortgage This is the most common way to repay your mortgage. Your regular repayment is made up of some of the amount borrowed plus interest every month. It means your mortgage will be repaid in full by the end of the term providing all payments are maintained in full and on time. Capital Repayment A lump sum payment made to your mortgage account and in addition to your normal monthly mortgage payment. Cashback Mortgage A mortgage product which offers you a cash lump sum upon completion - this may be a fixed lump sum or a percentage of your mortgage amount. Collateral/Security This is usually the property and which the lender can sell to repay the loan if the borrower does not maintain mortgage payments and falls heavily into arrears. Completion After you exchange contracts on a property, you will agree a date for completion with all the parties involved. This is the date at which property ownership is legally passed to the buyer, and when the seller must move out and the buyer may move in. Completion Fee This is a non-refundable fee which covers the processing of your mortgage application and setting up of your account. Consent to Let Permission from your mortgage provider will be required if you wish to let/rent out your property if your current mortgage is arranged on a residential basis. Contents Insurance This is an insurance policy which is used to cover your personal possessions in your household, in case they are stolen or damaged. Contract Variations Where a borrower makes a variation to the terms of their existing mortgage, for instance reducing /extending the term or converting the repayment type. Contracts The legal documents under which the buyer and seller of the property agree terms. Conveyancing The process of transferring ownership from one person to another. County Court Judgements (CCJs) Is an order made in a county court for a debt to be repaid in England and Wales. Credit reference agency Credit reference agencies are organisations that gather information about people and businesses across the UK. This information comes from lenders such as banks, credit card companies and fraud prevention agencies, as well as records in the public domain. Credit report Credit report is a report issued by a credit agency usually for a small fee which highlights someone's past purchase behaviour and credit rating. Credit search A credit search is when we carry out a search on your name and address with a credit reference agency to help us understand more about your credit history. Each time a search is done it is noted on your credit record to let other organisations know that we have asked for information about you. Credit Scoring A system used by lenders to assess the credit worthiness of potential borrowers. D Daily Interest This means the interest on your mortgage is calculated on the outstanding balance each day so every payment you make immediately reduces the balance on which your interest is calculated. Debt Consolidation A loan taken in order to repay existing outstanding debts. You may be able to spread the loan over a longer period, which may reduce your monthly payment, but by increasing the term you may pay more interest overall. It may be possible to increase your mortgage to pay off debts (subject to our lending policy), but it’s important to seek advice before doing this. Decision in principle (DIP) Before you make an application for your mortgage you can submit a DIP which tells you how much we would lend you based on your income and commitments. Deposit This is the amount of money that you pay on exchange of contract as part of your initial contribution to the purchase of your home. Direct Debit A Direct Debit is an agreement between you and a company you want to pay on a regular basis. The agreement you make authorises the company to collect varying amounts from your account on a regular basis. Because you’re covered by the Direct Debit guarantee, the company should always tell you what these amounts are - and when they’ll be collected. Disbursements The fees your solicitor or licensed conveyancer will incur during conveyancing e.g. search fees and land registry fees. These are added to your overall legal bill. Discharge Fee / Mortgage Exit Administration Fee A fee charged for the administration work involved of the lender to redeem your mortgage. Discount Rate This type of mortgage usually offers a discount off the lender’s Standard Variable Rate (SVR). The discount period usually lasts for a relatively short period – typically two or three years, after which, the rate reverts back to the Standard Variable Rate. E Early Repayment Charges On some mortgages, a charge will be made if part or the entire mortgage is paid off before a pre-agreed date, or moved to another product or lender. Your mortgage terms and conditions should state if this charge applies. Electronic Transfer This is the method by which your mortgage advance is paid to your conveyancer. Endowment Policy A long-term savings policy (usually between 10 and 25 years), which is often used to repay the capital element of an interest-only mortgage at the end of the termor pay off an outstanding mortgage in the event of death. This type of policy could be a repayment vehicle for an interest only mortgage. Equity The difference between the value of your property and the total amount of mortgage secured against it. Execution Only A mortgage transaction completed upon the specific instructions of the customer where the lender does not provide advice relating to the suitability of the mortgage transaction. Excess A fixed amount of money, which the policyholder agrees to contribute toward the cost of a claim under an insurance policy. Exchange of Contracts The date at which you agree to exchange contracts to commit to buying a property. Once contracts have been exchanged, you are legally obligated to buy the property. After exchange, a date for the completion of the property purchase can be set. F Feudal A form of legal title applicable only in Scotland Financial Conduct Authority (FCA) The Financial Conduct Authority is responsible for the regulation of firms' conduct and ensures the appropriate level of protection for consumers. First Charge Most mortgage lenders will require a first charge. This means that the lender has first call on any funds available from the sales of the property to clear the outstanding mortgage debt. First Time Buyer An individual who has not previously owned a property Fixed Rate This type of mortgage means that the interest is fixed for a specified period of time which means that the monthly repayments will remain unchanged until the product period ends. Freehold Where the borrower owns both the property and the land. G Gazumping A term used to describe the action of a seller accepting an offer and agreeing to the sale of their property, only to accept a higher offer before exchange of contracts has taken place. Ground Rent An annual charge payable by leaseholders to the freeholder. Guarantor A person who guarantees you will pay the mortgage repayments. If you don’t pay they are liable to have to pay them themselves. Often parents or relatives are guarantors for first time home buyers to help them to afford a property. H Higher Lending Charge (HLC) This is a fee sometimes payable by the borrower to insure the lender against potential loss if a home has to be repossessed or sold. Homebuyers report A survey on a property, carried out by professional surveyors on your behalf. You will receive a report on the condition of the property, stating any repairs or defects that need attention. A more comprehensive survey is called a full structural survey, which you might decide to carry out on older properties. Home Mover A person selling one property and purchasing another property. I Income Assessment The Society no longer assesses your borrowing capacity through income multiples and has developed a new Affordability Calculator which is now more tailored to your individual circumstances. Assessment of how much you can borrow is now calculated through a combination of your income, regular commitments and household / lifestyle expenditure. Income protection This can give you a regular monthly income if you are off work for a prolonged period because of an accident or illness. Initial Disclosure Document This document confirms the type of mortgage service we as a lender will provide. This can be Aadvised, where we offer help and advice on the type of product best suited for you or Execution Only, and non-advised, where you decide which product to apply for. Initial Interest Any payment due for the period from the day the mortgage began up to the first payment date. Insurance An agreement under which individuals, businesses and other organisations, in exchange for payment of a sum of money (a premium), are guaranteed indemnity for losses resulting from certain events or conditions specified in a contract (policy). Interest Only Mortgage You only pay interest to your lender throughout the mortgage term and your mortgage balance doesn't reduce. At the same time, you put money into a separate investment which should grow and pay off the mortgage as scheduled. You will still owe capital at the end of the mortgage term. It is imperative that you have a plan in place in order to be able to repay your loan. Please note that currently the Society does not offer Interest Only mortgages. K Key Facts Illustration This sets out details of the mortgage product that a customer is interested in. All mortgage lenders are required to set out the details in a Key Facts Illustration in the same format, so it’s easier for you to compare different mortgage deals. L Land Registry Fee A fee charged to register your details in the Land Registry records once you have bought a property or changed lenders. Leasehold Ownership of a property for a number of years on lease, after which ownership reverts back to the freeholder. Lending Into Retirement When the mortgage term exceeds beyond the customers retirement age. Lessee The person to whom a lease is granted - the tenant. Lessor The person who grants a lease - the landlord. Licensed Conveyancer An alternative to using a solicitor, they specialise in property ownership transfer. Life Assurance Type of insurance that will pay an amount to your estate when you die. This can be arranged to pay out a set lump sum or a decreasing amount that reduces in line with a mortgage. Loan to Value The amount of mortgage expressed as a percentage of the value of the property or purchase price, whichever is lower. For example, a mortgage of £80,000 on a purchase price of £100,000 would be 80% LTV. You can usually borrow up to 95% LTV although this may vary on certain products. Local Authority Search Part of the conveyancing process when you buy a property. It gives details of any matters which, from the local council's point of view, affect the property. It reveals any proposed changes to the local area, such as road improvements, and details any planning permission given for the property. M Member A member is a customer who has a qualifying account such as savings or a mortgage with the Newcastle. Our customers are 'members' because we are a mutual society. Mortgage A mortgage is a loan secured against a property. Mortgage Payment Protection Insurance (MPPI) This insurance can cover your mortgage payments if you can’t work because you've become unemployed or because of an accident or illness. Mortgagee The lender Mortgagor The borrower Mortgage Advance The actual amount of money we lend as a mortgage Mortgage Deed The legal document by which the lender secures the loan against the borrower's property. Mortgage Term The length of time over which you agree to repay your mortgage N Negative Equity This is when the amount you owe on a mortgage is greater than the value of your property. New Build Property The definition of a 'new build' means a property that has not been occupied within two years of being newly constructed, converted or refurbished. NHBC Guarantee A 10-year guarantee provided by the National House Building Council, that the builder will put right serious defects on a newly-built property. O Offset Mortgage An offset mortgage links your savings balances with your mortgage. Rather than paying you interest on your savings, you can offset your savings against your mortgage. Overpayments When you pay more than your normal monthly payment – overpayments made to your mortgage allows you to pay off your mortgage earlier. P Pension Plan An investment plan which can provide a lump sum and an income after retirement. A pension plan can be used as a way of providing a lump sum to repay the capital of an interest only mortgage. Personal Possessions Cover for accidental loss or damage to items that you usually take out of your home. Portable Mortgage If a mortgage is 'portable', it can be transferred from one property to another. Property Valuation When you apply for a mortgage we may ask you to pay a valuation fee to cover the cost of valuing your property. The valuation fee is payable prior to valuation and is non-refundable if the valuation is carried out. The valuation is very basic and is carried out for our benefit. We strongly recommend that you have a more thorough survey undertaken, such as a HomeBuyer Report as this will tell you about the quality and condition of the house you want to buy. Prudential Regulation Authority (PRA) The PRA works alongside the Financial Conduct Authority (FCA) creating a “twin peaks” regulatory structure in the UK. R Rebuild Cost This is the cost of rebuilding your home if it is damaged or destroyed by a number of different events such as storm, fire, flood and subsidence. The reinstatement value is not the same thing as market price. The reinstatement value is the cost to fully rebuild your home, including site clearance and legal fees. The cost of rebuilding your home varies, depending on where you live. Redeem/Redemption To pay off the outstanding balance of a mortgage in full Remortgage Transferring your mortgage from one lender to another without moving house is known as 'remortgaging'. Repayment (Capital & Interest) Mortgage This is the most common way to repay your mortgage. Your regular repayment is made up of some of the amount borrowed plus interest every month. It means your mortgage will be repaid in full by the end of the term providing all payments are maintained in full and on time. Repayment Vehicle/Strategy This is the means by which you choose to pay off the capital on an Interest Only mortgage when the mortgage term comes to an end. Please note that currently the Society does not offer Interest Only mortgages. Reservation Fee A reservation fee is payable on some mortgage products and is charged to reserve a particular mortgage product. This fee is non-refundable and is payable upfront. Repossessed This is where a property is taken by the lender if the borrower fails to make the mortgage repayments. The property is then sold so the lender can get their money back. S Sealing Fee A fee charged by the lender for sealing your deeds. Searches Checks carried out during the conveyancing process to determine any planning proposals or other matters which might affect the future salability of the property. Another search is carried out after the exchange of contracts to check that the borrower is not bankrupt. Stamp Duty This is a Government tax which you will have to pay if the price of the property you are buying is over £125,000. Property Value Stamp Duty Tax Up to £125,000 Zero The next £125,000 (the portion from £125,001 to £250,000) 2% The next £675,000 (the portion from £250,001 to £925,000) 5% The next £575,000 (the portion from £925,001 to £1.5 million) 10% The remaining amount (the portion above £1.5 million) 12% Standard Variable Rate The variable base rate is the basic rate of interest charged on a mortgage. This may change in reaction to market conditions resulting in your monthly repayments going up or down. Structural Survey A comprehensive survey carried out by a professional surveyor on your behalf, to thoroughly examine the condition of a property. Subject to Contract The phrase used before exchange of contracts which allows either party to withdraw without incurring a penalty. Sum Assured The amount paid out on the death of a policy holder. Surveyor/Valuer The person qualified by the Royal Institution of Chartered Surveyors or the Incorporated Society of Valuers and Auctioneers to carry out valuations and surveys of properties. Switch and Fix Some of our base rate tracker products offer the option to switch to a fixed rate at any point in the fixed rate period, without paying Early Repayment Charges on the tracker mortgage. T Telegraphic Transfer fee Also known as a CHAPS transfer, this term is used to refer to sending funds from one bank to another electronically. Term of Mortgage The number of years that you agree to repay your mortgage over. Tie in Period The period of time you would need to remain on certain mortgage products to avoid an early repayment charge. Title Deeds/Title Documents The documents which show proof of ownership. U Underpayments On some mortgages you can arrange to pay less than your normal monthly subscriptions for a limited period, up to your agreed borrowing limit. Please see product details for more information. V Valuation This is the basic assessment that is carried out on a property. It enables the Newcastle to decide whether to lend on the property by assessing its condition and likely value. This basic valuation is for the lenders benefit only. We would recommend that you have a more detailed survey such as a homebuyer's report or a full structural survey. Valuation Fee The charge for obtaining a valuation report of a property. The fee increases with the value of the property and is payable upon application. Variable Rate The variable rate is the basic rate of interest charged on a mortgage. This may change in reaction to market conditions resulting in your monthly repayments going up or down. Your mortgage will be secured on your home. Your home may be repossessed if you do not keep up repayments on your mortgage.