Important information

Please click on the relevant heading and you will automatically be taken to your chosen section. If you cannot find the answer to your query please feel free to contact us.

APRs explained
Higher lending charge explained
How to pay your mortgage
Interest calculation
Insurance explained
Legal fees, remortgages and further advances
Legal Costs
Mortgage features explained
Repayment or interest only mortgage?
Your commitment
Life Insurance
Society Rules

APRs explained

If you ask a number of different lenders what their repayments might be on a loan of say £10,000 at 6%, you may get a variety of different answers.

This is not because lenders are poor at doing their sums, but because there are many ways in which the question can be interpreted mathematically, depending on the assumptions made.

As a result it was hard for consumers to compare rates from different lenders. To solve this problem, the government introduced the APR (annual percentage rate) which must be quoted in adverts for many financial products.

The APR is calculated by a complex formula which expresses the total costs of a loan (i.e. not just interest but also fees and charges) over its anticipated lifetime, as a percentage – the APR.

APRs can be of great value to consumers – consider the following example. X Bank offers a discounted loan with an initial interest rate of 5.5% for a 3 year period, following which the borrower reverts to the “standard” rate of 7.75% for the remainder of the loan. Y Bank offers a “standard” rate of 7%.

Which is the cheaper? Depending on the level of fees charged, X Bank’s initial rate of 5.5% may translate into an APR of 7.5%, whereas the APR of Y Bank might typically be 7.4%.

This example has been deliberately simplified, but hopefully shows the way in which APRs enable more accurate comparisons to be made.

APRs are always expressed to one decimal place, so that an APR of 7.351% and an APR of 7.399% would both be quoted as 7.4%.

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Higher lending charge explained

The Society no longer offers any mortgages where a higher lending charge would be required. This may change in the future and so the following section of the website has been left unaltered in case it is of interest to prospective borrowers generally.

SRBS is now required by law to use the phrase 'higher lending charge' (to describe what used to be called a mortgage indemnity guarantee). The charge is in fact an insurance premium the whole of which is paid by SRBS to the insurers. Traditionally lenders considered 75% of the purchase price to be the maximum which it was prudent to lend. An HLC allows you to borrow in excess of 75% by insuring SRBS against the risk of making a loss following repossession and sale. The policy has a single premium/charge, which borrowers pay direct to their solicitor on or before completion. The policy is for the sole benefit of SRBS. In the event of a claim, the borrower(s) will still be liable to SRBS for any shortfall remaining (including the costs of repossession and sale) after applying the policy proceeds, and to the insurance company in respect of any sum which is paid to SRBS as a result of the claim.

The current scale of charges and a worked example (based on a loan of £87,000 and a purchase price of £100,000) should help you to estimate the charge applicable to your particular purchase. The charge cannot be added to your loan.

Loan to Valuation/purchase price	Charge
75 to 85%	3.10%
85 to 90%	4.36%
90 to 95%	6.04%

 

Value of property	£100,000
Loan required	£87,000 (87% of value)
Less 75% of value	£75,000
Charge payable on	£12,000
Premium rate	4.36%
Premium	£549.36

 

Charge calculation : £12,000 times 4.36% equals £549.36

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How to pay your mortgage

You may make payments by Direct Debit, Standing Order, transfer from an investment account with the Society or by cash/cheque. Mortgage payments may be made at any time during the month to which they relate and therefore they must reach SRBS no later than the last working day monthly to avoid any possibility of any fees becoming payable.

As Direct Debits are always claimed on the last working day, this is the preferred method of payment. (NB sometimes direct debits are not actually debited to your bank account until the first day of the following month).

If you pay by standing order please instruct your bank to make payments no later than 23rd monthly to ensure that they arrive on time. If you pay by direct debit or investment transfer you need take no further action when interest rates change. If you pay by other means, you must amend your arrangements accordingly.

Cheques should be made payable to 'SRBS re account………..'

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Interest calculation

SRBS calculates interest on the total debt outstanding on a daily basis. The interest rate charged will go up and down at regular intervals and these changes will be broadly in line with movements in the Bank of England Minimum Lending Rate ('Base rate'). The Society has a policy of keeping the rate as low as possible. You should be aware that there might be occasions when the Society adjusts rates at different times to the market generally.

Each time interest rates change, you will receive a letter notifying you of the new rate and the monthly repayment which will be sufficient to repay your mortgage within the term originally agreed.

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Insurance explained

Buildings insurance is compulsory and you must comply with the conditions set out in your offer letter IN FULL before SRBS will release the mortgage cheque.

For interest only mortgages, it is your responsibility to arrange a plan with a projected maturity value equal to the amount of the mortgage and life cover appropriate to your circumstances. For repayment mortgages, SRBS recommends that you take out mortgage protection or term insurance. SRBS does not insist on such cover however, so the decision must be made by the applicant(s) based upon their individual circumstances and needs.

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Legal fees, re-mortgages & further advances

For further advances and re-mortgages, it usually makes sense to use the Conveyancer who acted for you when you purchased the property as they will already be familiar with the deeds. If you do not currently have a relationship with a Conveyancer, SRBS has made arrangements with local firms of Solicitors who would be happy to undertake the necessary work on your behalf for any property in England or Wales.

Details are listed below, and if you would like to take up this offer, you may either nominate one of the solicitors on the application form, or insert the words 'Society Scheme'. We will then send your details to the Solicitor and they will contact you direct. The Solicitors involved are:

Jewels Solicitors
Victoria Chambers, 15 Victoria Road, Stafford, ST16 2BY
Tel : 01785 602030
Fax : 01785 222455
DX : 25305 Stafford 2
Contacts: Caroline Carnes and Sue Ball

Hacking Ashton
Berkeley Ct, Borough Rd, Newcastle under Lyme
Tel : 01782 715555
Contact: James Hickey

Hand Morgan and Owen
17, Martin Street, Stafford, ST16 2LF
Tel : 01785 211411
Contact: Paul Slater

Hand Morgan and Owen
3, Albion Street, Rugeley WS15 2BY
Tel 01889 583871
Contact: Anita Patel

The fees quoted are on the assumption that the work is of a standard nature. If you know of any factors which may complicate the legal work, you should tell the Solicitor concerned at an early stage so that they can advise you of any likely increase in the figures below.

Further advances : £75 plus vat plus disbursements. In a standard case disbursements are estimated at £16.

In some cases SRBS can carry out the legal work for a further advance without involving a solicitor. If this happens the costs incurred will be deducted from your advance cheque. Please contact SRBS to find out if you qualify for this service.

The MAIN exclusions from the scheme are Leaseholds, non-domestic property, property with second charges outstanding, property with residents over 17 who are not party to the mortgage and loans where total lending exceeds of 75% of the value of the property.

Remortgages:	£145 plus vat plus disbursements. In a standard case disbursements might consist of the following:
Local search:	Varies according to the Local Authority in which you live. Stafford Borough Council charges £155 but local search indemnity insurance at £35 may be more appropriate in some cases.
Mining search:	Required if recommended by the surveyor. £24 usually.
Misc. searches:	£10 approximately.
Land Registry:	From £40 upwards depending on size of advance.

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Legal Costs

The Society will use your nominated conveyancer to carry out the necessary legal work provided that the firm has more than one partner (except in the Stafford area where sole practitioner conveyancers known to the Society are acceptable). The charge for this work will usually be included in the bill your conveyancer sends you. If you use a sole practitioner conveyancer outside the Stafford area or carry out your own conveyancing, the Society will instruct its own Solicitor whose bill for this work will be deducted from your mortgage advance.

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Mortgage features explained
(goes to separate page)

Daily interest
Overpayments
Underpayments
Payment holidays
Change of term or type
Drawdown facility
Flexible payments
Low start facility
Redemption penalties
Additional lending
Direct debits

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Repayment or Interest Only Mortgage?

With a repayment mortgage (also called capital and interest), each month you repay some of the capital borrowed along with an amount of interest. At first you pay mostly interest but as time goes on more of each monthly payment will be capital and less will be interest.

The chart below shows how the balance of a typical repayment mortgage might reduce over time. If a mortgage protection policy is arranged, it will aim to pay out a sum roughly equivalent to the balance owing at the date of death. The actual sum paid is however usually a little more or a little less than the balance owing, depending on whether the average interest rate actually paid is greater or less than the rate at the time the policy is taken out.

Mortgage protection policies do not acquire surrender values. If you repay a mortgage early, you can stop payments on a mortgage protection policy, continue the policy in respect of a new mortgage, or you can continue the policy as a stand alone life policy which is not linked to a mortgage. Mortgage protection policies are relatively cheap because as the risk of a claim increases with time, the sum which would be payable goes down. If you do not die within the term of the policy then the insurer does not have to pay out at all.

Years Elapsed	1yr	3yrs	5yrs	10yrs	15yrs	20yrs
% of original mortgage still owing	97.9%	93.5%	88.6%	73.9%	55.1%	31.0%

NB figures relate to a 25 year repayment mortgage and are approximate rather than exact.

With an interest only mortgage you only pay interest on the amount borrowed, so the sum you owe to SRBS does not change for the life of the mortgage. In addition you make payments into an investment plan which aims to provide a lump sum at the end of the mortgage term which is used to repay SRBS. At the end of the plan there may also be a surplus which will be returned to you but if the plan you select under-performs against expectations there can also be a shortfall. You should therefore regularly review the performance of your plan against its projected maturity value. SRBS will normally be happy to negotiate repayment of any shortfall over a period of time to suit you, as it recognises that investment planning is subject to sudden market changes. Even if you have an interest only mortgage you are still free to make repayments of the capital borrowed without restriction.

If you wish to repay a mortgage early your investment plan can be continued as a stand-alone investment, used for a new mortgage or surrendered. If you surrender a plan you may not get back as much as you have paid in. SRBS recommends that you seek advice from your investment advisor before cancelling a plan.

SRBS is not registered to sell either mortgage protection policies or investment plans and cannot advise on such matters, therefore it is the applicants’ responsibility to make their own arrangements if they elect to use the proceeds of an investment plan to repay an interest only mortgage.

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Your commitment

A mortgage is a long-term commitment to make payments on a regular basis. In addition to the monthly mortgage payment, you will have to pay premiums for buildings insurance and any life insurance specified in the mortgage offer.

These payments will continue until the property is sold even if your personal circumstances change.

You therefore need to consider the effects of long term sickness, premature death of a joint mortgagor, unemployment, relationship breakdown etc. on your ability to meet your commitment.

If you fail to meet your mortgage payments, the Society will try to agree with you, a scheme to bring your payments up to date over a period of time.

If this is not possible then ultimately the Society may have to repossess and sell your home.

If this happens, your mortgage account will be debited with the solicitors fees, estate agents fees, court fees and any other costs incurred.

If you fail to pay premiums on a life insurance policy, the insurance company will lapse the policy. If an insured person subsequently dies, then the survivor/executor may have to sell the property if they are unable to keep making the mortgage payments.

If you fail to pay premiums on an investment plan, there may be insufficient available at the end of the mortgage period to repay the mortgage.

If you elect to insure the building yourself and the Society receives notification from the insurers that you have not paid the premium, the Society will insure the property for the amount of the mortgage and debit your mortgage account with the premium. In these circumstances YOU will be totally uninsured.

You must ensure that your mortgage payment reaches the Society on time each month.

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Life Insurance

Life cover is strongly recommended for most mortgages but is not compulsory. The Society does not sell life insurance so applicants are free to make their own arrangements.

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Society Rules

Please click on the PDF file below to read the Stafford Railway Building Societies Rules. If you wish to save the file right click on the link and select 'save as'.

Stafford Railway Building Societies Rules