MORTGAGE JARGON BUSTER
The process of getting a mortgage and purchasing properties can be stressful and confusing for people who have not experienced it before. It can be even more overwhelming if your broker or estate agent uses fancy jargon that you don't understand.
Agreement in Principle
Also known as a Decision in Principle. A Decision in Principle is an estimate from your mortgage lender of how much they may be willing to lend you for your mortgage. This will give you an indication of what properties you can afford.
These are fees charged by your lender to set up and secure your loan.
Mortgage payments which have not been paid as requested and have become overdue.
The rate of interest set by the Bank of England, which lenders use to work out their interest rate.
An adviser is independent of the lender who can help you to get your mortgage.
Buy to let mortgage
A loan designed for landlords that want to buy a property to rent it out. These are generally interest only and monthly payments will come out of the rental income that is received, with the rest of the mortgage being paid off when the property is sold.
The amount of money you borrow from your lender.
The final legal transfer of ownership of the property, when the property becomes yours.
This is a score based on your previous credit history, this is worked out by examining missed payments, debts and your ability to keep up payments. Your credit rating tells lenders how risky it will be to lend to you.
The legal process of buying and selling a property. Carried out either by a solicitor or a licensed conveyancer.
Decision in Principle
A Decision in Principle is an alternative term for 'Agreement in Principle'.
The amount you need to pay towards the total purchase cost of your property. Some lenders will offer mortgages starting at a 5% deposit.
The difference between the value of the property and the outstanding payments owed on your mortgage
Fixed Rate mortgage
A mortgage where the interest rate stays the same for an agreed period of time (e.g two or five years) even if the base rate changes within that time.
This is a mortgage where you can underpay, overpay, and in some cases even not pay at all each month without getting any extra charges.
When the seller, having already accepted an offer, accepts another higher offer from someone else, before contracts are exchanged.
A third party who agrees to meet the monthly mortgage repayment if you are unable to make the payment. More commonly required for first-time buyers, with the guarantor most likely to be a parent or guardian.
Help to Buy
Help to Buy is a UK Government scheme, designed to help first time buyers purchase their home.
This is the charge made by the lender on the amount you owe, the amount added to what you borrow each month until your entire loan is paid off.
Interest only mortgage
This is where the monthly repayments consist of just the interest charged and do not reduce the capital borrowed, which will be paid off In full at the end of the term.
A joint application is when you have equal property ownership rights with another person or multiple people. If one person dies, ownership reverts entirely to the surviving person or persons.
The difference between property value and the amount borrowed, the remainder is paid as the deposit.
For example, if you were to purchase a property worth £200,000 and put down a 10% deposit of £20,000. You would need a 90% LTV, meaning you will borrow £180,000.
A loan taken out against a property.
A bank, building society or other financial institution that offers mortgages.
Monthly repayments consist of a combination of the capital owed and the interest charged.
The agreed period over which you agree to repay the loan.
A mortgage taken out on a residential property.
Charged by the lender for the valuation of the property. This is used as security for the mortgage.
The person(s) you are buying your new home from.