Jargon Buster
Rebuilding cost
This is the recommended amount (assessed by your property
valuation) that you should take out buildings insurance
cover for.
Redemption
This is the right of the mortgagor to recover mortgaged
property on repayment of the loan and any interest due.
This legally means that once you as the borrower have finished
repaying the mortgage you took out, the property is yours
and the lender has no further claim on it. If you pay of
the mortgage ahead of schedule you may face a redemption
penalty which compensates the lender for loss of interest.
Redemption penalties
Charges paid to the lender in compensation for lost interest
if you redeem your mortgage ahead of schedule. During a
discount period you will be severely penalised if you try
to switch to another product or mortgage provider. Penalties
can be stepped just like discounts, and can be particularly
severe within the first year. This is to ensure that the
costs that the lender endures in setting up the mortgage
are always covered. Penalties can be a fixed sum of money,
though are often proportion of the loan. With cashback mortgages,
you often have to repay the amount of money you received
as cashback.
Redemption penalty overhang
This is where the redemption penalty continues beyond a
fixed or capped rate period, effectively tying you in to
the much higher variable rate for a period of time after
the fixed or capped period. As a result you get stuck paying
an uncompetitive rate that eats into the gains you may have
made from having the fixed rate or capped ratein the first
place.
Redemption statement
The outstanding amount to be repaid on an existing mortgage.
Redundancy insurance Another form of income protection,
but one that does not cover any form of sickness, injury
or disability. The purpose of this type of policy is to
replace income lost through a short to medium term period
of redundancy. It provides you with a monthly tax-free income
to cover a portion of your lost earnings. It is often sold
in conjunction with the accident, sickness and disability
element of income protection policies, in which case it
is known as Accident, Sickness and Unemployment (ASU).
Reinstatement value
The cost of rebuilding your home should it be destroyed.
Remaining balance
The amount of unpaid principal on a home loan.
Remaining term
The original loan term minus the number of payments made.
Remittance fee
A charge made by the lender for sending the mortgage funds
to your solicitor when the purchase is just about to be
completed
Remortgage
The process of switching your mortgage loan from one lender
to another without necessarily moving house.
Repayment mortgage
Each month you will make a repayment to the mortgage
lender. Part of this payment will go towards reducing the
total amount of capital you owe and part of it will be an
interest charge on the remaining balance of the mortgage.
Unless interest rates change or your introductory offer
period ends, you pay the same amount each month. When one
of these things does happen, repayments are altered so that
the loan is still repaid at the end of the specified term.
Repayment period
The period over which the borrower must repay the lender.
Repayment plan
When a borrower falls behind in mortgage payments, many
lenders will negotiate a repayment plan rather than go to
court.
Repayment term
The period of time over which you will repay your mortgage
to the lender.
Repayment vehicle
The means by which a mortgage loan's capital is repaid.
Examples include endowments, ISAs and personal pensions.
Repo rate
The Bank of England base rate.
Repossession
Usually occurs after a borrower seriously defaults on payments.
The lender then legally evicts the borrower and usually
auctions the property to recover losses.
Restructured loan
A mortgage in which new terms are negotiated.
Retail Price Index
An index of the average level of prices in the UK. Insurance
companies often link contents insurance policies to it.
Retention
This relates to monies withheld by lenders until certain
mortgage conditions are met. This will normally relate to
repairs or improvements to the property that the lender
is insisting on.
Retrieval cost
The cost incurred to recover amounts or items.
Reverse mortgage
A special type of loan available to equity-rich, older owners.
Repayment is not necessary until the borrower sells the
property or moves into a retirement community.
Review of rate
The interest rate you are charged can be reviewed either
annually or on a monthly basis. This feature does not affect
fixed rate mortgages during the fixed period, or capped
rate products when the rate is above the cap level.
Revisionary bonus
A bonus paid annually on an endowment mortgage which is
dependent on the performance of the investment fund you
are using to repay your mortgage.
RPI
An index of the average level of prices in the UK. Insurance
companies often link contents insurance policies to it.
