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Glossary of terms

Say what? Buying a house is one of the biggest investments most of us will make in our life, so it’s important to understand the process. Don’t worry if some of the terminology is making your head spin, we’ve tried to break down the jargon for you here.

  • Administration Fee

    We will charge a fee to cover all the administration associated with assessing, underwriting and processing your application up to and including making a formal mortgage offer.

  • APRC (Annual Percentage Rate of Charge)

    An APRC is a good way to compare different lenders. It provides an average annual cost of the mortgage as a percentage. It includes interest charged over the full term of your loan, as well as any other fees you may need to pay, such as an arrangement fee.

  • Arrangement Fees

    Arrangement fees are administration charges made by lenders for setting up the mortgage. An arrangement fee is charged when the mortgage is drawn down and can be paid separately or added to the mortgage loan. It will vary depending on the type of mortgage and also the interest rate option selected.

  • Base Rate

    The base rate is set by the Bank of England for lending to banks and building societies. The base rate influences the interest rates offered by lenders, so if the base rate goes up it’s likely mortgage or savings rates will go up by a similar amount.

  • Broker

    A broker is an impartial person or company that arranges a mortgage between you and a lender. They will take care of a lot of the paperwork, will recommend the best mortgage for your needs and will be able to justify that recommendation.

  • Buy To Let

    A buy to let mortgage is designed specifically for landlords who want to buy property to rent out.

  • Capital Repayment Mortgage

    A capital repayment mortgage calculates a monthly payment that will pay off the capital and interest by the end of the term.

  • Collateral Valuation Fee

    This fee is only chargeable when you are taking out a mortgage which is secured against a second property as well as the mortgaged address. We will need to value the property being offered as collateral security.

  • Completion Fee

    This fee is to cover the costs of setting up your mortgage account on completion. It includes to cost of assessing your insurance arrangements and transferring the funds electronically to your Solicitor.

  • Deeds

    The deeds, or title deeds, is a document which details the chain of ownership for land and property. This is usually held by the mortgage provider until you have paid your mortgage off.

  • Deposit

    A deposit is a sum of money that goes towards the cost of the property that is being purchased.

    The deposit must be provided from the applicants’ own resources, not borrowed from elsewhere such as a personal loan or credit card. The only exceptions to this is when the deposit is gifted by a family member; subject to a deed of gift, or where funds have been raised against another owned property.

    Builder’s deposits/incentives are acceptable subject to full UK Finance disclosure of incentives form being provided to the valuer.

  • Decision in Principle (DIP)

    A decision in principle (DIP), is the first step to getting a mortgage. A lender will provide a reasonable estimate of how much you can borrow based on your income, expenditure and your credit score. The amount you can borrow may occasionally change when you get your mortgage offer.

  • Early Repayment Charge (ERC)

    You can redeem your mortgage at any time during the mortgage term. We will charge interest up to the date we received cleared funds. If you redeem your mortgage early, in full or part, there may be an additional charge to compensate us for the mortgage not running its full term. This charge is called the Early Repayment Charge. Early Repayment Charges are usually attached to preferential interest rates.

    If there is an Early Repayment Charge attached to your mortgage, this will be detailed in your Mortgage Illustration and Mortgage Offer. It is usually either a percentage of the loan repaid or a number of days interest.

  • Equity

    The equity you have in your home is the value of your home minus your outstanding mortgage. In other words, it is the amount of money you would get back from selling your home if you ignore the costs of selling.

  • Exit Fee

    An exit fee may be applied by your lender when you repay your mortgage in full or move to another lender.

  • Fixed Rate Mortgage

    A fixed rate mortgage has a fixed interest rate for a set period of time, so your mortgage payments won’t change during that period even if the Bank of England base rate changes.

      • Interest Only Mortgage

        An interest only mortgage allows the borrower to only pay the interest charged for the term of the loan. As you’re not paying any of the capital of the mortgage, you will need to have another repayment method to pay back the amount borrowed at the end of the term of the mortgage. Your mortgage lender will want details of how you intend to repay the mortgage.

      • Interest Rate

        A mortgage interest rate is the percentage of the loan that you will be charged for borrowing money from your mortgage lender. The amount of interest you pay will affect how much your monthly repayments are.

      • Interest Rate Floor

        There may be a limit on how low your interest rate can fall. This is called an ‘interest rate floor’. The interest rate floor applicable to your loan will be specified in your loan documentation.

      • Intermediary

        An intermediary is an impartial person or company that arranges a mortgage between you and a lender. They will take care of a lot of the paperwork, will recommend the best mortgage for your needs and will be able to justify that recommendation.

      • Joint Mortgage

        A joint mortgage allows two or more people to take out a mortgage to buy a property. All applicants will be responsible for paying the mortgage so if one person can’t pay, the other will need to make up the difference. Typically, all applicants will also be owners of the property.

      • Joint Borrower Sole Proprietor

        Joint Borrower Sole Proprietor is a feature of our Residential and Buy For University mortgages. You can find out more about what it means here.

        • Legal Fees

          You will need a Solicitor to carry out the ‘conveyancing’ of the property – that is all the legal work involved in transferring the ownership of the property to you.

          The Society also needs a Solicitor to carry out the legal work involved in setting up your mortgage and registering it with the Land Registry. If you choose a Solicitor who is acceptable to the Society, they can act on our behalf as well as yours. If not, the Society will instruct its own Solicitor, but you will be responsible for the charges incurred. The Solicitor’s fees are usually paid on completion of the mortgage and must be paid from your own funds (fees for searches are usually paid up front).

        • Loan To Value (LTV)

          Your loan to value (LTV) is the size of your mortgage relative as a percentage of the value of your house. A lower LTV normally means a lower interest rate as the mortgage won’t be as risky for a lender.

        • Maturity Date

          The mortgage maturity date is the end of your mortgage term when you will have repaid your mortgage or need to repay the mortgage if you have an interest only mortgage.

          If your mortgage has a period when your interest rate is fixed, or has a fixed discount, then your product maturity date is the end of that period.

        • Monthly Repayment

          The amount you pay each month depends on your interest rate, your loan size and, for capital repayment mortgages, the term of your mortgage.

          If you are paying interest only, the monthly payment will be the interest charged on the mortgage that month.

        • Mortgage Illustration

          A mortgage illustration, or ESIS (European Standard Information Sheet), is a document that will explain the key features of a mortgage. This will include the monthly payment, interest rate details and any fees that will be chargeable at both the start and the end of the mortgage.

        • Multi-Unit Freehold Block

          A Multi-Unit Freehold Block (MUFB) is one freehold property that is typically split into individual flats with no individual leases.

          Our criteria defines a Multi-Unit Freehold or Multi-Unit Freehold Block (MUFB) as up to three self-contained units listed under one freehold title, not multiple leaseholds. Examples include a house that has been converted into flats, or a row of terraced houses. Each property on the title must be a self-contained unit and can be rented out to different tenants.

          • Outstanding Balance

            An outstanding balance explains how much you still have left to pay on your mortgage.

          • Overpayment

            A mortgage overpayment allows you to pay more off your mortgage than what is contractually agreed with the lender. By overpaying you could save money on your interest payments and pay off your mortgage sooner. Most mortgages allow you to pay more into your mortgage than your monthly mortgage payment. This reduces the interest you are charged and allows you to pay off your mortgage sooner or reduce your monthly mortgage payment. Some mortgages have early repayment charges for partial or full repayments of the mortgage above a certain level.

              • Remortgaging

                Remortgaging is when you switch your current mortgage to a new deal either with your existing lender or a new lender.

              • Representative Joint Borrower

                The first person names on your Bath Building Society mortgage is called the Representative Joint Borrower. The Representative Joint Borrower is the only person named on a mortgage who is entitled to vote on borrowing Members’ resolutions. The other parties to the mortgage do not have voting rights.

              • Stamp Duty Land Tax

                Stamp duty Land Tax (SDLT) is a tax paid to the Government when you buy a property. First Time Buyers are exempt from SDLT for a residential purchase.

              • Standard Variable Rate (SVR)

                A standard variable rate (SVR) is the variable rate set by your lender. Most rates with an initial fixed or variable rate move onto an SVR once the initial period has finished.

                There may be a limit on how low your interest rate can fall. This is called an ‘interest rate floor’. The interest rate floor applicable to your loan will be specified in your loan documentation.

              • Term

                A mortgage term is the length of time that you have to pay the loan off.

              • Top-slicing

                Top-slicing is where a buy to let lender uses a borrower’s personal income to top up any shortfall in rent which is needed for the borrower to obtain the loan amount they require.

                • Valuation Fee

                  The Society will require a Mortgage Valuation Report on the property being offered as security for the mortgage.

                  The actual fee required will depend on the purchase price or estimated value of the property. Some mortgage products may incorporate a facility to refund the cost of a Mortgage Valuation Report up to a specified amount when the mortgage completes.

                  The Mortgage Valuation Report is a superficial inspection and report which is principally to advise the Society whether the property provides reasonable security for the mortgage advance. More detailed surveys are available.

                • Variable Rate

                  A variable rate mortgage is a mortgage linked to a rate that can change, meaning that the amount you pay each month can change. Discounted rates are a type of variable rate mortgages.

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