Secured loan glossary

A to E

Affordability assessment

The lender's check that you can meet the repayments alongside your existing commitments, based on income and spending rather than the equity in your home.

APRC

Annual percentage rate of charge. The interest rate plus the fees included in the calculation, expressed as a yearly percentage over the full term. See What does APRC mean?

Arrangement fee

A charge for setting up the loan, sometimes called a product fee. It may be paid separately or added to the borrowing. See fees explained.

Combined loan to value

Your mortgage and the new secured loan added together, as a percentage of the property's value. See how much equity you need.

Consolidation

Using one loan to repay several debts. Moving unsecured debts into a secured loan puts your home at risk. See debt consolidation.

Decision in principle

A lender's preliminary indication of what it may lend, before documents and the property have been checked. Not an offer.

Early repayment charge

A charge for repaying the loan, or more than the permitted overpayment, during a set period. See paying off a secured loan early.

Equity

The property's value minus all borrowing secured against it.

ESIS

European Standardised Information Sheet. The personalised illustration setting out the loan's features, costs, repayments and conditions.

F to L

First charge

The lender with first claim on the property if it is sold, normally your main mortgage lender.

Fixed rate

A rate that does not change for an agreed period. See fixed vs variable rates.

Further advance

Additional borrowing from your existing mortgage lender, secured under the same mortgage.

Interest-only

A mortgage where payments cover interest only and the capital is repaid at the end of the term. Secured loans are usually repayment loans.

Loan to value

The borrowing as a percentage of the property's value. For a second charge, lenders look at the combined figure.

M to R

Offer

The lender's binding document confirming the loan terms. For regulated mortgages it starts a reflection period.

Redemption statement

The lender's figure for repaying the loan in full on a given date, including any early repayment charge.

Reflection period

At least seven days after a binding offer during which you can consider it. You can accept sooner if you choose. See how to apply.

Remortgage

Replacing your existing mortgage with a new one, sometimes borrowing more at the same time. See secured loan or remortgage.

S to Z

Second charge mortgage

A loan secured against your home behind your existing mortgage. The common legal form of a homeowner secured loan. See secured loans explained.

Secured loan

Borrowing secured against an asset, here your home. If repayments are not kept up, the lender can ultimately seek repossession.

Term

The length of time over which the loan is repaid. A longer term reduces the monthly payment and increases the total interest.

Unsecured loan

Borrowing with no asset as security. Missed payments still have serious consequences. See secured vs unsecured loans.

Valuation

The lender's assessment of the property's value for lending purposes. It may be automated, desktop or a physical inspection.

Variable rate

A rate that can change during the loan, so the payment can rise or fall.