Understanding the language of your Mortgage Deal
The decisions you make when getting a home are important and some of the terminology can be complicated. We want to make sure you’re in the know about your mortgage, so you’ll find a glossary below that will explain the words and phrases you’ll hear when buying a home.
Advance (Mortgage Advance)
This is any sum of money which we lend to you under the Mortgage Deed.
Annual Percentage Rate of Charge (APRC)
This is the total cost of the mortgage shown as a yearly percentage of the amount you borrow. It takes into account your monthly payments and all other charges for arranging the mortgage.
For some types of mortgage we will ask you to pay an application fee before your mortgage can be considered. The fee is non-refundable.
Bank of England Base Rate
This is the interest rate set by the Bank of England, currently 0.75%.
Buildings Insurance covers the structure, fixtures and fittings of your home e.g. roof, walls and ceilings. When you take a mortgage with us we require that you have insurance cover for the property mortgaged. The policy can be arranged through ourselves or another provider.
Buy to Let mortgage
Buy to Let mortgages are a type of mortgage product for customers who wish to purchase property for business purposes.
This is a lump sum payment made to a mortgage account in addition to the agreed Monthly Payment. This can reduce the balance of your mortgage and means you may be able to reduce your monthly payments or pay off your mortgage more quickly.
This is an agreed date by which all contracts are signed and money has changed hands. This means you will have the keys to your new house and can start making it your home.
This is the fee you pay to us to complete your mortgage, in some cases this can be added to the mortgage balance.
Consumer Buy to Let mortgage
Consumer Buy to Let is a type of mortgage for customers who are not acting for a business purpose when applying for a Buy to Let mortgage.
This is the legal process of transferring property from one owner to another.
A check we carry out to ensure the applicant’s credit history allows us to lend to them.
Daily Interest for Mortgage Accounts
This means that we charge interest on the balance outstanding on the account at the end of each day. The interest is then added to your mortgage at the end of the month. Every time you make a payment, reducing the balance of your account, the daily interest charge is reduced the following day.
Decision in Principle (DIP)
This is the initial agreement letter that we will lend you the money to buy your home, subject to all conditions, criteria and checks being met.
Discount Variable Rate
An agreed reduction to our Standard Variable Rate (see below for explanation of Standard Variable Rate).
Early Repayment Charge
A fee you may have to pay if your mortgage is repaid or transferred during the initial product period or if you overpay more than the maximum allowed.
Your signed contract will be sent to the seller’s solicitor who will arrange, once signed, for a copy to be sent back to your solicitor.
The mortgage of a property which is let to a family member.
Fixed Rate Mortgage
A Fixed Rate Mortgage means that the interest rate is set for an agreed period of time (the Fixed Rate term). During this term the rate won't change.
Income and Expenditure Form
This is a form all potential borrowers will need to fill in to ensure they can afford the monthly mortgage payments.
Interest is charged from the start date of your mortgage. This is the date we transfer funds to your legal representative. The interest from the start date to the end of that month is known as the ‘initial interest’ and we will ask you to pay this sum by direct debit. Shortly after funds are released to your legal representative we will confirm in writing to you the initial interest that is due.
Instructing a Solicitor
Usually, when a solicitor is instructed to act for you in the purchase of a property, they carry out legal work which we require too. For this reason, The Cambridge works with an Approved Solicitor Panel from across East Anglia and other parts of England who we’ve approved to act on your behalf. If you choose to appoint a firm that’s not on our panel, the Society will require its own partner solicitor to act on its behalf. You’ll be responsible for the Society’s legal fees in addition to your own. Don’t worry – your Mortgage Adviser can easily help you find a suitable panel solicitor.
Interest Only Mortgage
With this type of mortgage the capital amount of your loan remains as a standing debt to us until the end of the term of your mortgage. It is then repaid, by you, in full. You only pay interest on the loan during the term of the mortgage.
If you choose this method, it is your responsibility to ensure that you have also arranged an appropriate repayment strategy to repay the outstanding mortgage, in full, at the end of the agreed term. You must check your repayment strategy regularly to see that it is on target to repay the amount of your mortgage. You must also ensure that payments for endowment or pension policies and other investment plans are kept up to date and continue to provide you with the level of cover required. Failure to provide for the repayment of the loan, at the end of the term, will result in your total loan being in arrears and we may take action against you.
Interim Review for Variable and Tracker Rate Mortgages
If you have a variable or tracker mortgage, your monthly payments can go up or down. Following a change in your interest rate, your monthly payments will be adjusted accordingly and you will be personally notified of your new monthly repayments.
There are certain legal requirements that must be carried out when buying a house. These will need to be arranged by a legal representative and unless otherwise stated the borrower is responsible for this cost.
You can choose a mixture of repayment and interest only. Your monthly payment is made up of the interest charge for the whole loan plus repayment for part of the capital of the loan. At the end of the term all the money you borrowed must be repaid.
Your Mortgage Adviser who will support you every step of the way. They will look at your individual circumstances and recommend a mortgage based on what you tell us.
This is the legal document you sign to give us security over the property.
After your mortgage interview your Mortgage Adviser will produce a mortgage illustration. They will use this to guide you through the important information about your recommended mortgage, such as the type and term of the mortgage, interest rates, cost of repayments and any fees.
Should you decide to go ahead with a Cambridge mortgage, you'll need to attend a mortgage interview with a Mortgage Adviser.
At your interview your dedicated Mortgage Adviser will look at your individual circumstances and recommend a mortgage based on what you tell us. There are lots of choices to make and your Mortgage Adviser will guide you through the entire process, ensuring you get decisions and information as quickly as possible.
You will receive a formal written offer from us stating how much we will lend to you, how long for and how much in total you will be repaying.
Our security is created by the Mortgage Deed over your property and is held until the total mortgage debt has been repaid.
This is the period of time (usually up to 40 years) over which you agree to repay the mortgage to us.
With certain mortgage products from The Cambridge, you can make extra payments when you like: this can reduce your balance more quickly so that you pay your mortgage off earlier.
On selected Cambridge mortgages you can let your overpayments build up and use them at a later date to fund a ‘payment holiday’ for up to 12 months. During the payment holiday we use your overpayments to fund the monthly payments you would normally make and to cover the interest charged during the payment holiday.
This is where the terms and conditions of a mortgage product can be transferred to a new property.
This is the act of paying off your mortgage in full.
After receipt of your binding mortgage offer you will have a seven day right of reflection period.
With this method, you repay your loan, and interest charged, in monthly instalments. Your mortgage is repaid entirely over the term agreed.
For each mortgage product we show a representative example demonstrating the total amount of credit, the total cost of credit, the total amount payable and the APRC. Representative examples can be found on our product pages.
Staircasing is the process of increasing your share of your property when you are part of a shared ownership scheme.
A tax paid by the person buying the property. The tax rate is tiered and based on the purchase price and is set by the government:
|Property Purchase Price||Stamp Duty||Buy to Let/ Additional Home Rate (from April 2016)|
|Up to £125,000||0%||3%|
|£125,001 - £250,000||2%||5%|
|£250,001 - £925,000||5%||8%|
|£925,001 – £1,500,000||10%||13%|
|£1,500,001 and above||12%||15%|
A stamp duty calculator has been created by HM Revenue and Customs.
Standard Variable Rate (SVR)
This is a mortgage rate. The interest rate may change from time to time which may result in changes to your monthly payments.
Tariff of Mortgage Charges
These are different fees that you may need to pay throughout the mortgage process. Your Mortgage Adviser will advise you of these fees during your mortgage interview. You can also refer to our Tariff of Mortgage Charges to see what fees may apply to your mortgage.
This follows the Bank of England’s base rate for a set period of time. We guarantee that any changes to the Bank’s base rate will be passed on to your mortgage interest rate within 30 days.
Type of Valuation - Buildings Survey
This is a detailed technical examination of a property. It may include tests on services and opening up small sections of the floor and other concealed areas in order to check otherwise inaccessible parts of the property. The report will give advice on the repairs, but it does not normally include a valuation.
Type of Valuation - Homebuyers Report
A report by a surveyor or similarly qualified person on the condition of a property which is being considered for purchase. This service is less thorough than a buildings survey but provides reasonable detailed information at a slightly higher cost than a basic valuation.
The property valuation is a legal requirement in the buying process and will help us to decide whether and how much to lend on the property.
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