Finance - Banking

Banking jargon

AER: Annual equivalent rate

The total interest you're paid on your savings and current account balances, showing the total it would amount to if it was paid and compounded annually.

APR: Annual percentage rate.

This represents the true annual cost of borrowing including interest and any expenses like valuation and legal fees. Because we calculate interest on the basis of daily balances you could be better off.

When most banks lend you money, they work out the annual interest payment on the full amount that you've borrowed, and apply it to every year of the term of your loan.

So you'll pay the same amount of interest in the final year of your loan as the first, even though you may have paid off most of the capital.

Because we calculate interest on the basis of daily balances, as the amount you owe reduces, so does the amount of interest you pay, so you get a fairer deal.

Average balance

The average balance of your current account and savings is used in our calculators to show the benefits of offsetting. In reality, these balances will vary from day to day. Because we calculate interest on the basis of daily balances, we make the most of your money.

Capital repayment

The process of paying back the money you owe on your mortgage. Offsetting saves you interest, so you could do this faster.

Combination mortgage

You can choose a combination mortgage. This can consist of interest-only parts, repayment parts, or a combination of both of these methods of mortgage repayment.

Please note that for any part of a mortgage which is interest-only, the capital must be repaid by you at the end of its term. Therefore for any such interest-only element, you must make arrangements to set up a savings or investment scheme which will provide sufficient funds to repay the capital.

Completion date

During a house purchase, the day on which the buyer's conveyancer pays the balance of the purchase price to the seller's conveyancer, to allow transfer of ownership. In Scotland this is called the entry date.

Customer identification number

A unique 10-digit number, given to you when you first apply. You'll need to quote this when you contact us about your application.

Disability

"Disabled" means being unable to work at your normal occupation because of an accident or sickness.

Gross rate

The rate of interest you're paid before the deduction of income tax at the rate specified by law (currently 20%)

Income Multiple

Your 'income multiple' is used as a guide to how much a lender will be prepared to advance you on a mortgage based on your annual salary.

Interest only

A type of mortgage where your regular mortgage payment only covers the interest on the loan.

ISA

A savings account with government-imposed limits on the amount you can save each year, which pays interest without deducting tax.

Jar

All the products in an offset plan are called jars. You can choose to name your jars to help you to keep track of your finances.

'Key facts about our insurance services' document

A document that provides you with details of the level of service we offer.

'Key facts about this mortgage' document

A document that details our mortgage product, the overall cost, regular mortgage payments, fees payable and other features of the mortgage. This is also known as a 'key facts illustration'.

Level term assurance

A life insurance policy that pays out a set amount on the death of the person insured by the plan.

Loan To Value

Loan to value refers to the amount of money borrowed (the loan), expressed as a percentage of the value of the property to be purchased or remortgaged (the value). The value of the property is defined as either the purchase price or the valuation, whichever is the lower.

Payment holiday:

With some products you can skip up to two monthly payments a year by taking a payment holiday. The amount is simply added to what you owe, and your remaining payments increase slightly to cover it.

Plan number

A unique 10-digit number that you'll be asked for when you call us to make a transaction over the phone.

Plan security code

A four digit code given to you when your plan is open. You'll need it to register for online banking, and when you call us to make a transaction. You must not write this number down or tell it to anyone.

Repayment

A type of mortgage where your regular mortgage payment is split between paying interest and repaying the money you borrowed.

Retention

An amount held back from the initial loan by a lender until certain repairs or improvements have been completed or, in some cases, to cover the cost of road building on a new housing estate.

Tracker Rate Mortgage

A rate which guarantees to stay at a fixed level above the Bank of England rate, so you benefit from any reductions as soon as they happen.

Tax on savings

With offsetting you're saving interest - not earning it, so there's no tax to pay.

Combination mortgage

You can choose a combination mortgage. This can consist of interest-only parts, repayment parts, or a combination of both of these methods of mortgage repayment.

Please note that for any part of a mortgage which is interest-only, the capital must be repaid by you at the end of its term. Therefore for any such interest-only element, you must make arrangements to set up a savings or investment scheme which will provide sufficient funds to repay the capital.

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