Mortgage terms and fees explained

What is a mortgage term?

A mortgage term is the length of time you will be repaying your mortgage for. If you are looking for more information to explain mortgage terms and phrases, our guide could help you. We explain some of the key terms you might come across when applying for a mortgage. If you are still unsure about mortgage fees or terms, you should seek further advice before applying.

Common mortgage terminology

Mortgage terms and fees can sometimes be confusing with multiple products to choose from. It is important that you know what each of these terms mean when applying. We have put together some information on key mortgage terminology you might encounter when selecting a mortgage product.

  1. 01

    Monthly payments

    If your mortgage starts today, this is the amount you will pay each month. Many mortgage products have a fixed repayment term, often 2 or 5 years, with your monthly payments likely to change after this period based on your ‘follow on rate’.

  2. 02

    Interest rate

    This is the interest rate you'll pay at the start of your mortgage term, linked to the monthly payment. It's either fixed or variable (tracking the NatWest Bank base rate). This rate will usually apply for a fixed period initially of 2 or 5 years. Fixed repayment periods do not apply to our standard variable rate.

  3. 03

    Mortgage term

    This is the length of time you would like to take to repay your mortgage in full.

  4. 04

    Product fee

    This is a fee charged as part of your mortgage deal, usually associated with your interest rate. This is not an administration fee.

  5. 05

    Loan to value (LTV)

    This is a ratio of the size of the mortgage (i.e. the amount you would like to borrow) against the value of your property or the purchase price.

  6. 06

    Total cost for initial period

    This is the total amount you’ll pay, including interest, over the fixed period (either 2 or 5-year) based on the product deal you have selected.

  7. 07

    Follow on rate

    After the initial 2 or 5-year deal period, your mortgage rate will move to our standard variable rate. This is a variable rate and could go up or down. As you come towards the end of your initial deal, you can look to switch your mortgage with us onto a new deal.

What is a mortgage illustration?

A mortgage illustration is a document from your mortgage lender that explains your mortgage terms and fees in more detail. You will usually receive an initial mortgage illustration following advice from a lender or once you’ve complete an agreement in principle online and selected a mortgage deal. Once an offer has been made you will receive a final mortgage illustration document. The mortgage illustration will include information about the features of your loan, explanation of the interest rate you have chosen , and lots of other information. This will include costs and fees such as early repayment charges and overpayments. You should read this document carefully to make sure you understand the terms of your mortgage product.

Can I overpay on my mortgage?

You can pay more than your required monthly payments on most mortgage products if you want to pay off your loan sooner. If you have taken a fixed rate product there will likely be an Early Repayment Charge to pay your loan in full. You can usually only overpay a maximum percentage of your loan during each 12 month period too without further charges and fees.

Early Repayment Charge

How much will this cost?

Most fixed term mortgage products will include an Early Repayment Charge if you want to repay your loan in full. This is usually calcualted as a percentage of the outstanding balance. Tracker mortgage products do not usually carry an early repayment charge, but remember that your monthly payments can change on this product. You might not have to pay an early repayment charge if your are porting your mortgage.

Overpayment calculator

How much can I repay?

If you want to make additional payments on your mortgage, you can usually do this at a fixed percentage every 12 months without facing an Early Repayment Fee. You can find information about overpayments and the percentage you can pay in your mortgage illustration document. Use our overpayment calculator if you want to work out the amount you could overpay and the changes this would have on your remaining repayments.

Mortgage jargon buster

The above terms and phrases relate to mortgage products but there are a lot more mortgage terms. If you still have any questions about mortgage products then our mortgage jargon buster could help answer them. It also includes links to additional mortgage guides that are related to each of the terms.

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