Additional Loans Glossary

Term

Description

A

Additional Borrowing/Additional Loan

Additional Borrowing is for existing mortgage customers who want to release equity in their home. This borrowing is secured against your property, so missing payments may put your home at risk of repossession.

APR

Annual Percentage Rate. This is the total charge for the loan including fees and interest expressed as a percentage, which allows you to compare across the market.

Affordability

How much you can afford will depend on the total monthly outgoings from your income and how much is left. The important thing is to be realistic and not take on too much. Budget planners are essential.

B

Base Rate

The Bank of England sets interest rates to keep inflation low, issues banknotes and works to maintain a stable financial system. The Bank of England controls the base rate and sets the level at which money is bought and sold. The base rate is reviewed monthly and they can move up or down. If you have a fixed rate product this won´t change, during the fixed rate period, but a variable rate product may change when notice is given.

C

Credit scoring

This is a process that we and most banks use when making decisions about lending money. We use the information you provide in your application (eg. age, job, existing financial commitments).

To do this, credit checks are also made at credit reference agencies to check how you’ve managed credit with other lenders. And if you are an existing customer we’ll also look at your accounts. All these factors affect our decision.

Credit reference agency

Credit reference agencies are independent companies that collect information from lenders on how individuals manage their money.

Credit Rating

Your credit ratings can change according to how you manage your money. You can improve your chances of getting credit by:

• Paying off any current debts on time to show you are committed to future repayments
• Not constantly applying for credit as this will show on your record and reduce your credit score
• Making sure you are on the electoral role as many lenders use this to check who you are
• Never missing out any previous addresses
• Settling any outstanding debt and ensuring your credit file reflects this, as unpaid credit will remain on your file for six years

Collateral

Property or assets owned by someone who wants to borrow money which they agree will become the property of the company or person who lends the money if the debt is not paid back.

D

Direct Debits

Direct debit is an automated payment system that allows you to pay off your loan easily every month. We require all our customers to have a direct debit set up when taking a loan with us, and most banks operate in the same way.

E

Equity

The difference between the value of the property and the amount of any loans secured against it.

Early settlement

If you have taken Additional Borrowing and you are not tied into an introductory rate, then you can pay off your additional loan portion without charge. A mortgage  exist fee for paying off your entire mortgage or taking it elsewhere will apply.

F

Fixed rate loans

These are fixed and can’t be changed by the lender or the customer for the term agreed. Even if the Bank of England change the base rate, your loan will remain unchanged giving you added peace of mind.

I

Interest rate

Interest is the amount we charge to lend you money. It can be fixed over the term you choose so it doesn’t go up or down. The full cost of your mortgage can be compared using the Annual Percentage Rate (APR) given by us and other lenders.

L

Loans

Loans are either secured or unsecured and are both ways of borrowing money. An unsecured personal loan is not secured against the value of your home or any other asset. A secured loan lets you borrow against the equity in your home. This is more commonly known as Additional Borrowing or an Additional Loan.

Loan to Value (LTV)

The size of a mortgage expressed as a percentage of the value of the property or its purchase price

P

Payments

Your payments will depend on the product you choose. For example, Additional Loans require monthly direct debit payments.

T

Terms and Conditions

Its important that you read the terms and conditions presented to you before accepting credit. These set out the way your product will work and the contract between you and the lender.