Apt Financial Management

Mortgage Jargon Buster

Capital & Interest

This method, also known as a repayment mortgage, pays off capital as well as interest and the mortgage debt should be cleared at the end of the mortgage term.

Interest only

With an interest-only mortgage, your monthly payments only cover the interest on the loan - they do not pay off the loan itself. So you will need to make separate arrangements to pay off the loan when the mortgage ends. If you don't, you could lose your home. You can make your arrangements through your lender - but you don't have to.

Fixed rate

This option applies to the rate of interest charged. The lender will offer a guarantee that no matter what happens to interest rates, you will be charged a fixed rate that does not move for a specific period. These types of product are good for budgeting as you know what you will be paying for the term of the fixed rate.

Tracker Rate

The Tracker rate is a relatively new product which is becoming more common now. You will usually pay a set percentage above the Bank of England base rate, sometimes for the life of the loan, so the rate ‘tracks’ the base rate. It is a type of variable rate.

Discounted Rate

This is a variable rate mortgage where the lender reduces the normal rate for a set period of time at the start of the mortgage. This reduction is guaranteed for a specified time, sometimes for a certain number of years from completion but more often until a set date in the future.

Capped Rate

This means that the interest rate charged on a mortgage is designed not to rise above a certain rate known as the capped rate, should the Lender’s Standard Variable Rate (SVR) increase.

Standard Variable Rate

This is the lender's standard mortgage interest rate before they apply any discount or introductory offer. This usually changes in line with interest rates, hence your payment can go up and down although as the base rate fell to record levels a number of lenders did not pass on the base rate cut to their standard variable rate.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Apt Financial Management, 4 The Willows, Hulland Ward, Ashbourne, Derbyshire DE6 3EW
Phone: 01335 370 515