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.
