Jargon buster
Annuity
An annuity converts a lump sum into income which is taxed.
APR
Annual percentage rate – the APR includes important factors such as:
- the interest rate you must pay;
- how you repay the loan (length of loan agreement [or term], frequency and timing of instalment payments and amounts of each payment);
- certain fees associated with the loan; and
- certain compulsory insurance premiums (for example, payment protection insurance).
Arrangement fee
A commitment or administration fee usually payable to the provider
to reserve the funds.
Buildings insurance
Insurance to cover the cost of repairing or rebuilding your home if it's damaged or destroyed.
Equity release
A way in which you can benefit from the value of your home without having to move out – by borrowing on it or selling all or part of it for a regular income or a lump sum.
Fixed-repayment lifetime mortgage
You take out a loan that pays you a cash lump sum and, instead of paying interest on the loan, you agree to pay the lender more than you borrowed when you sell your home.
Home income plan
You take out a loan that pays you a cash lump sum and is secured against your home. You buy an annuity to give you a monthly income, usually fixed for life.
Home reversion
You sell all or part of your home to a third party in return for regular income and/or cash lump sum and continue to live in your home for as long as you wish.
Interest-only mortgage
You take out a loan on which you only pay the interest back each month. You do not pay off any of the capital. Instead, in a lifetime mortgage, the lender will be repaid by selling your home when you die or go into long-term care.
documents
Important information for you, set out in a standard way, so you can compare service, product and costs. Make sure you get them and read them.
Legal fees
A fee you pay to your solicitor for their services.
Lifetime mortgage
You take out a loan secured on your home, which is repaid by selling your home when you die or go into long-term care.
Mortgage
A loan secured on property.
Negative equity
The amount you owe the lender is more than the value of your home.
Roll-up mortgage
You take out a loan as regular income or cash lump sum. The interest on the loan is rolled-up each month or year and added to the loan. This means you may end up owing more than the value of your home (i.e. more than you borrowed).
Secured
Secured means that if you do not keep up the payments on your loan, the lender can sell your home to get its money back.
Shared appreciation mortgage
Some lifetime mortgages include this element. The lender gives up the right to get some or all of the interest on the loan. Instead, you agree to allow the lender to take a share in any increase in the value of your home when it is sold.