Glossary of buy to let terms

Annual Percentage Rate of Charge (APRC)

The APRC is the amount of interest applied to a mortgage product on an annual basis. It takes into account all additional expenses and discounts, along with how much time is left on the mortgage term, giving you a full average cost of borrowing per year.

Arrears

An account is defined as being in arrears when the due date has passed and payment for that month hasn't been made.

Arrears Fees

These are fees that are charged when an account is in arrears. Any charges applied will be added to your mortgage account, along with any interest charged.

Capital and interest mortgage

With a Capital and interest mortgage you repay both the interest and a small percentage of the borrowed capital each month. That means that your mortgage will be paid off in full (if you continue to meet your payments) at the end of the mortgage term.

Early Repayment Charges (ERCs)

Paying back your loan early or overpaying may mean you'll have to pay an ERC. The amount you'll be charged depends on the terms and conditions of your product.

Experienced landlord

An applicant who has owned and let a buy to let property for at least the last six months (they may or may not own and occupy their own home).

First time buyer (FTB)

An applicant who hasn't owned and occupied their own home for the last six months and hasn't owned and let a buy to let property for the last six months.

First time landlord (FTL)

An applicant who has owned and occupied their own home for at least the last six months, but hasn't owned and let a buy to let property for the last six months.

Fixed rate mortgage

A fixed rate mortgage provides the security of fixed mortgage repayments until the end of the deal period, no matter what happens to interest rates. Once the deal period has finished you will automatically be put on The Mortgage Works managed Rate unless you choose a new Fixed or Tracker deal at that time.

Flexible features

With our fixed rate and tracker mortgages you can overpay part of your capital balance in each 12 month period (from the date your product started), without incurring any early repayment charges. To find out more about your overpayment allowance, check your Mortgage Offer.

Further Advance

A Further Advance is an additional loan using your property as security (sometimes referred to as a second mortgage or additional borrowing).

Full Liability

Full Liability is where the guarantor guarantees (agrees to pay should the main borrower be unable) the full amount of the loan.

Guarantor Mortgage

With a guarantor mortgage a close relative agrees to act as guarantor for all or part of the mortgage amount. The guarantor must be able to prove that they can afford to cover the mortgage loan in the event that the borrower is unable to keep up with the monthly payments.

Houses in Multiple Occupation (HMO)

• A property occupied by five or more people or with five to seven lettable rooms in an area commensurate with multi letting
• A property with more than one tenancy agreement in place.

Interest only mortgage

With interest only mortgages, your monthly payments only cover the interest on the amount you owe (so you're not reducing the outstanding sum each month). The idea is to put the money that you would have spent repaying your mortgage into an endowment or ISA policy as a repayment vehicle. If the sale of the property covers the outstanding mortgages and charges it's acceptable as a repayment method.

Interest rate

This is the rate at which the lender calculates the interest they charge the borrower for the mortgage, expressed as a percentage.

Let to buy

A first time or experienced landlord who is remortgaging their existing main residence as a buy to let and purchasing a new residential property simultaneously.

Limited Liability

Limited Liability is where only a fixed proportion of the loan is guaranteed by a Guarantor (usually a close relative) up to a maximum of 30% plus an additional 10%. This means the guarantor agrees to pay a percentage of the loan should the main borrower be unable.

Loan to value (LTV)

The loan to value represents the amount you are looking to borrow (or the remaining amount of your existing mortgage) as a percentage of the value of the property. For example, if a property is valued at £100,000 and you have a £80,000 loan, the LTV is 80% (80,000/100,000 x 100 = 80%) with your deposit equaling 20% of the total value of the property.

New Build  

• A house/flat built within the last 12 months
• A house/flat built over 12 months ago but still owned by the developer
• A house/flat built over 12 months ago but the first purchase/legal completion of the property was less than 12 months ago.

Overpayments

This is when you pay more than your required minimum monthly payment and build up an overpayment reserve. This enables you to pay off your mortgage earlier (conditions apply).

Part and part mortgage

Part and part mortgages allow you to combine elements of both capital repayment and interest only.

Portfolio landlord

A portfolio landlord is a borrower with four or more distinct mortgaged buy to let UK rental properties (or seven or more for remortgage applications without capital raising). This includes holiday lets, properties owned through a limited company, ‘consent to let’ properties and all buy to let mortgages owned solely or jointly by the applicant. 

Porting

Porting is the practice of keeping the same mortgage when you sell your old property and buy a new one.

Property valuation

Since no two properties are alike, a valuer has to perform a property valuation to assess each property individually and arrive at a proposed value, usually called its Market Value. A fee is usually charged for this service.

Redemption Charge

If you have a mortgage with The Mortgage Works and would like to repay your mortgage in full, you'll pay a charge unless you're taking a new mortgage with us at the same time.

Regulated Buy to Let

Where the property will be occupied by the borrower or a member of the borrower's immediate family, now or in the future.

Remortgage

When a person transfers their mortgage from another lender.

Rental income

Rental income is the amount of rent you expect to generate from a property.

Repayment (capital & interest) mortgage

With a Repayment (capital and interest) mortgage you repay both the interest and a small percentage of the borrowed capital each month. That means that your mortgage will be paid off in full (if you continue to meet your payments) at the end of the mortgage term.

Second charge

A second mortgage secured on your property with another lender. A second charge is secondary to your main loan so when the property is sold, the main lender will be repaid first.

Switching

When you move from one mortgage deal to a new mortgage deal with the same lender.

The Mortgage Works (TMW) Managed Rate

If you're not on The Mortgage Works fixed or tracker deal, then you're on our Managed Rate which is a variable rate. The Mortgage Works Managed Rate is not subject to any upper limit or cap and is not tied to the Bank of England Bank Rate.

Tracker rate mortgage

With a tracker mortgage, the interest rate you're charged will go up and down in line with the Bank of England Bank Rate by an agreed percentage, with no tracker floor. Once the deal period has finished, you'll automatically be put on the The Mortgage Works Managed Rate unless you choose a new fixed or tracker deal at that time.