Glossary

Early Repayment Charge (ERC)
An early repayment charge is a fee payable to your lender if you wish to switch mortgages before the end of a specified period, and is usually applied to many fixed, discount or capped mortgage deals.

For example, an early repayment charge may last for the first five years of a mortgage term, and remortgaging during those years will leave you liable to settle the ERC before switching deals. The cost of the charge is usually calculated on a percentage of the outstanding mortgage amount, or basd on a number of months interest. Early Repayment Charges can add to thousands of pounds, and so it is important to remember the cost when considering a new mortgage.

Loan-to-Value (LTV)
The percentage of the mortgage amount borrowed against the lender's value of your property's value is known as the loan-to-value.

For example, if your mortgage amount is £80,000, and your property is valued at £100,000, you will be borrowing at a loan-to-value of 80%.

Previously it was possible to borrow up to 100% of a property's value, or in some cases over 100%, (known as a 100% mortgage) - however due to recent changes in the UK mortgage market these deals are no longer available and the majority of lenders will only lend up to 80% LTV.

Standard Variable Rate (SVR)
A lender's Standard Variable Rate is the rate of interest that the lender will base all of it's mortgage deals upon.

Based upon the Bank of England's base rate, a lender's Standard Variable Rate will tend to fluctuate in accordance with any changes made to the Bank of England's base rate. As a rule of thumb mainstream/high-street lenders will usually set their Standard Variable Rate at 2 percent above the BoE's base rate - so if the BoE base rate is at 4%, the lender's SVR will be 6%. However, lenders who specialise in providing mortgages for the credit impaired (knowns as sub-prime lenders) will set their SVR higher.