A little help to understand the language of mortgages.
APR
Annual Percentage Rate is the overall cost of a loan, taking into account the term, interest rate and other costs.
Arrangement fee
A fee charged by the lender when taking out a mortgage.
Bank of England Base Rate
The interest rate set by the Bank of England.
Building survey
An extensive survey, carried out by a qualified surveyor, to identity faults and any potential problems in the property you are considering buying.
DisbursementsThe fees you pay to the conveyancer or solicitor. These may include Land Registry fees and stamp duty.
Discounted mortgage
A mortgage with a discounted variable rate of interest for a set period, after which the rate will increase.
Early repayment charge
A charge you may have to pay if you terminate a mortgage early - by paying it back early and/or moving to another lender.
Energy Performance Certificates
Energy Performance Certificates record how energy efficient a property is. The certificate will provide a rating of the energy efficiency and CO2 emissions of a building from A to G, where A is very efficient and G is very inefficient.
Equity
The total value of your property less the current mortgage amount and any other secured loans you have against the property.
Fixed rate
An interest rate that is fixed, not going up or down, for a set period of time.
Flexible mortgage
You can vary the amount you pay each month.
FCA
The Financial Conduct Authority – the UK’s financial services regulator.
Guarantor
If your income isn’t enough to secure a mortgage in your own right you may appoint someone who guarantees the mortgage repayments. Your guarantor is fully liable for repaying the mortgage if you default on the loan.
Higher lender charge
This is an insurance premium that you may be asked to pay for some mortgages. Usually this happens when the Loan to Value (LTV) is higher than a certain level. Not all lenders require this and the starting level and rate charged may vary. This used to be known as a mortgage indemnity guarantee premium.
Income multiples
Your earnings will be multiplied by this amount to decide how much you can borrow.
Interest
The charge made by lenders when you borrow their money.
Interest rate
The figure that determines how much interest you pay.
Interest-only mortgage
A mortgage where you only pay the interest charges of the loan each month. You are not reducing the loan amount. At the end of the agreed time, you will still owe the lender for the property.
Land Registry fee
A fee paid to the Land Registry to register ownership of a property.
Lease
A legal contract which gives the ownership of a leasehold property to the buyer for a fixed period of time
Loan-to-value
The percentage of money you want to borrow compared to the cost of the property.
Mortgage
A loan which is secured against a property.
Mortgage broker
A mortgage broker helps you understand the various mortgage types and deals available. A mortgage broker will provide mortgage advice and recommend a mortgage for you or they may provide you with information to enable you to make your own choice.
Mortgage deed
The legal agreement which gives the lender a legal right to the property.
Mortgage term
The period of time over which the mortgage will be repaid.
Offer of advance
The formal offer of a mortgage from a mortgage provider.
Redemption figure
The outstanding amount to pay off a mortgage.
Remortgaging
The process of changing your mortgage for a different one, without moving home.
Repayment mortgage
A mortgage that pays off both the mortgage loan and the interest at the same time. On completion of the mortgage term your mortgage will be fully repaid, provided all the mortgage payments have been made.
Stamp duty land tax
A tax which home buyers must pay on properties above a certain value. For current rates please select the following link, https://www.gov.uk/buy-sell-your-home/tax
Standard variable rate mortgage
A loan at the lender's normal mortgage rate, without any discounts or deals.
Secured loan
A mortgage is a secured loan on your home. If you fail to repay the mortgage your lender may be able to repossess your home to get its money back.
Structural survey
A more detailed report which is tailored to your needs. It may be useful when buying an old or unusual property.
Title deeds
A legal document which sets out the ownership of a property.
Tracker mortgage
A mortgage with an interest rate that is usually linked to a particular rate and that moves up or down with it.
Valuation
A brief inspection of the property you are looking to buy, for the benefit of the mortgage lender. This ensures that the mortgage lender is not lending more than the property is worth and the property is suitable security for the mortgage. It will not tell you if it is a good or bad buy. For your own peace of mind, you may want your own survey.
Vendor gifted deposit
This is where the person selling the house funds a percentage of the deposit on behalf of the purchaser. The purchase price must be a fair market price and cannot be over-inflated to account for the gifted deposit. However, not all banks accept this method of raising a deposit and all insist on part of the deposit to be paid by the purchaser.
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