There is a lot of 'jargon' used in the mortgage industry. We have tried to provide you with a comprehensive explanation of all the terminology that you may come across during the mortgage process
APRC stands for the Annual Percentage Rate of Charge. The APRC is the total cost of the credit to the consumer, expressed as an annual percentage of the total amount of credit.
These are usually charged by the lender when arranging a loan on certain products.
The Bank of England Base Rate determines how much other banks and building societies pay for the loans that they take out from the Bank of England. These base rates will in turn affect the interest rate paid for loans including the loan on your mortgage.
This is a temporary loan which enables you to complete the purchase of your property before completing the sale of your existing house. A typical example of when you may need one would be if you wanted to buy a second property before you'd sold your first.
These are usually charged by the lender when arranging a loan on certain products.
This is a type of mortgage used to buy property that will be used solely for the purposes of renting to a third party i.e. you as the owner never intend to live there.
This is simply another term for capital repayment
There are two ways of repaying a mortgage either by the capital
repayment or interest only route. With a capital repayment
mortgage, the capital and interest elements of the loan are paid
off with each monthly installment, with the balance reducing over
the length of the loan.
Therefore by the end of the mortgage term, assuming all mortgage
payments are made, you have paid off the balance in full and you
therefore own your property outright.
This is a type of loan where a maximum rate of interest is set
at the start of the mortgage term. During the capped rate period
the interest rate can fall below the capped rate but will never
rise above it.
What this means for you the borrower is that you know how high the
mortgage payments could rise but are guaranteed the rate will not
go any higher, therefore making home loan budgeting easier.
This is a mortgage that complies with specific guidelines laid
down by the government who wanted to set out basic and transparent
conditions for all mortgage products.
Particularly in terms of the charges applied the flexibility of the
mortgage and the terms applicable to it. The aim is to make
mortgages more straightforward and easier to understand.
This is a mortgage used by businesses for the purpose of
purchasing their own business premises or for financing for
investment purposes.
For example, you would need to apply for a commercial mortgage when
investing in commercial property or purchase commercial property
for investment purposes.
This is the point at which the money to buy your new property is released to the seller, ownership is then transferred to you and you become a proud home owner!
This is the legal process involved when buying or selling property. Most people use a solicitor or a licensed conveyancer when buying or selling a property because there's quite a lot of detailed work to do when transferring ownership of a property. If you are obtaining a mortgage your lender will insist that you use a solicitor.
Decreasing Term Life Insurance (sometimes called mortgage
protection assurance) is where the sum assured decreases over the
term of the policy. This type of policy is typically purchased by
people who want to protect their repayment mortgage in the event of
death.
As the outstanding mortgage balance reduces every year, so does the
level of insurance. The purpose of this type of plan is to repay
any capital you owe if you died.
A deposit is the term used for the monies that you use as a down-payment on a property that you intend to buy.
These are the fees your solicitor has to pay on your behalf (e.g. Stamp Duty, Land Registry fees and search fees) which will be added to your conveyancing bill from the solicitor on completion of the buying or selling of a property.
A discounted rate mortgage offers you reduced repayments for a
given term. This interest rate is discounted from the published
lender standard variable rate, for an agreed period from the start
of the mortgage.
What this means for you the borrower is that you are guaranteed to
pay a set amount below the standard variable rate for the period of
the discount. The standard rate can go up and down, but the
discount amount remains fixed during the agreed period.
If you pay off your mortgage in full or make overpayments in
excess of the amount agreed by your lender at the outset you may be
asked to pay an early repayment charge by your lender.
This charge is raised in order to recover any losses or costs
incurred by your lender as a result of your early payment.
This is a form of life assurance savings scheme that pays out a
lump sum at the end of an agreed period.
If the Endowment is linked to an interest only mortgage, the lump
sum from the endowment policy is designed to repay the mortgage,
subject to investment returns.
An endowment mortgage is a type of interest only mortgage
designed to repay the mortgage, subject to investment returns. They
usually have two parts, the first is a monthly interest payment to
the mortgage lender and the second, a monthly payment into an
endowment policy that is mainly invested in stocks and
shares.
What this means is that you are only paying off the interest on the
loan during the term on the mortgage so the balance of your
mortgage never changes. The mortgage is designed to be repaid at
the end of the term with the proceeds of the endowment policy,
subject to investment returns
This is the positive difference between the value of your
property and the amount of any outstanding loans secured against
it.
For example if your home was worth £300,000 and the mortgage on
your property was £100,000 your equity would be £200,000.
This is the stage in England, Wales and N.Ireland when both the buyer and seller have legally committed themselves to the sale and purchase of a property and are legally bound to complete the transfer.
There are mortgages available exclusively for first time buyers and can have some special features such as; assistance towards legal fees, cash backs and free valuations.
This is the term for a person taking out their very first mortgage.
This is a mortgage rate where the interest rate is agreed at the
start of the mortgage and will not change during the term of the
fixed rate.
So you know exactly how much your monthly payment will be each
month during the fixed rate period.
When you have the freehold on a property this means that you solely own the property and the land it is situated on.
This rather unfortunate state of affairs occurs when another
potential buyer puts in a higher offer for a property after your
offer on the same property has been accepted.
This means that your offer is then rejected. This can happen
because under English law, the seller is not legally committed to
go ahead with the sale until the point at which contracts are
exchanged.
This is the term used for insurance for the lender for you defaulting on your payments when your property is worth less than the loan or in some cases this charge is payable when you are only able to pay a small deposit. There are many mortgages that do not carry this charge and based on your situation it is possible that this type of charge can be avoided altogether.
These are the charges made on a loan, calculated as a percentage of the total amount that you borrowed on your mortgage.
There are two types of mortgage, interest only or capital
repayment. With an interest only mortgage the balance of your
mortgage stays the same throughout the mortgage term.
Interest and sometimes a premium in a suitable investment vehicle
are paid monthly. At the end of the term, the proceeds from the
investment vehicle are intended to repay the mortgage. This amount
will depend on the performance of the investment vehicle.
If you do choose an interest only mortgage you are responsible for
ensuring that you have sufficient funds available to repay your
mortgage at the end of the term.
This is a system used mainly in England where you own the
property for a set period before handing back ownership to the
freeholder. When you hold a leasehold on a property, it remains the
property of the freeholder.
A leasehold will set out the details of obligations of the
leaseholder for repairs and maintenance of the property.
These are the fees charged by a solicitor or other qualified individual to carry out the legal work associated with buying a property.
This is a life assurance policy which will repay your mortgage
should you die during the term of the loan. The amount repaid is
set as the balance of your mortgage at the start of your loan; this
doesn't change during the term of the mortgage. Should you survive,
there will be no benefit.
It is very important to understand the concept that if you are to
live until the end of the term, your policy will expire and no
payment will be made.
In a nutshell this is the interest rate on a mortgage loan.
This is the term used for the type of loan used to buy a property.
This is the creditor or lender i.e. your bank or building society, that lends you the money for your mortgage.
This is the person who borrows money, usually to buy a property.
This situation occurs when a mortgage is greater than the actual
value of the property. This can occur due to a decline in the value
of the property after it is purchased.
For example, if the mortgage on the property is £300,000 but the
value of the property is only £270,000 then a negative equity
situation has occurred.
This is the formal document approving the mortgage you have requested. This document details the terms and conditions that will apply during the whole term of your mortgage.
This is a type of interest only mortgage where the loan is
designed to be repaid by a lump sum from a pension plan on
retirement. If you have a personal pension you can link your
mortgage loan to a pension plan. At the end of the mortgage term,
part of the tax-free proceeds (the tax free lump sum) of the
pension fund is used to repay the capital outstanding.
It is worth noting however, that a pension plan mortgage will
reduce the amount available to providing you with a pension in
retirement. However, tax relief is available on your pension plan
contributions. Having paid off your mortgage with your pension
fund, the remainder of your pot of money will then be used to
provide you with retirement income via an annuity.
This is the term used when moving your mortgage from one lender
to another without actually moving house. You may do this to save
money.
This might be possible by switching to another mortgage product
with the same lender or by switching your mortgage to a competitor.
But remember, if you move lenders, the saving you make on the
interest rate you pay may be partially or wholly eaten up by the
transaction charges associated with moving your loan.
So, if you are thinking about remortgaging it is advisable to do
your sums carefully and take good advice from a mortgage adviser.
If you don't do your homework properly you could face the
equivalent of several months' mortgage payments which would
effectively wipe out any of the benefits of remortgaging
These are mortgages specifically tailored for public sector
tenants who qualify to buy their home under the Government's
Right-to-Buy scheme. You may be eligible to qualify to buy your
council home if you are a secure tenant of either; a London Borough
council, a district council, a non-charitable housing association,
or a housing action trust.
Discounted rates are usually offered to council tenants for their
homes. So if you are a council tenant wanting to buy your home, the
rate you will pay will depend upon how long you have lived there.
The amount of discount you will receive is roughly in proportion to
the number of years you have been paying rent.
These are the enquiries made, usually by your solicitor, at the Land Registry, the Land Charges Register and Local Authorities to ensure there is nothing to cause concern about title to the land and the property you intend to buy.
This is a package for people looking to build their home themselves.
This is a charge levied by the government on house purchases. There is a sliding scale of stamp duty depending upon the value of the property you are buying. Your mortgage broker can provide more information on the amount you will have to pay when purchasing your property.
This is the provisional agreement made between the buyer and the seller, before contracts on a property are actually exchanged. This allows either side to back out of the agreed sale without any financial penalty.
This is an evaluation of the condition and value of a property, carried out by an approved surveyor and paid for by the buyer.
This is the length of time over which your mortgage loan is repaid.
This is the legal right to the ownership of your property.
These are the legal documents showing the ownership of your property.
This is a variable rate mortgage where the interest rate is linked directly to the Bank of England Base Rate. Therefore when the Base Rate changes, the rate on your tracker mortgage changes by the same amount. For example, if the Base Rate increases by 0.25% then your mortgage payments will increase by the same amount.
This is the legal document which transfers ownership of registered land from the seller to the buyer.
This is an independent assessment of the value of a property carried out by an approved surveyor and paid for by you the customer. All lenders insist that a valuation is carried out on a property. The valuation is used by the bank or building society to decide how much they are willing to lend you.
This rate can go down as well as up during the course of your mortgage and is usually based on The Bank of England Base Rate, but can also be based on the lender's own standard variable rate that they can determine.