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A to Z of mortgage terms

 

If you are confused by the huge array of terms used in the mortgage market you are not alone. In an effort to help, we have created a quick A to Z of some of the terms you are most likely to hear (and a few silly ones where we couldn't find a term for the relevant letter).

 

APR - annual percentage rate. Usually shown in brackets after the headline rate for a mortgage deal, the APR is meant to incorporate any additional payments beyond the interest rate, thereby indicating the true cost of the deal. However, anomalies in the way lenders are allowed to calculate their APRs means they are not always an accurate reflection of what your loan would cost or a useful comparison with other loans.

 

Base rate - the rate of interest set by the Bank of England. Sometimes lenders call their own standard variable rate their base rate or basic rate.

 

Capped rate - a rate of interest with an upper limit but which becomes variable if the lender's standard variable rate falls below that level.

 

Discounted rate - a variable interest rate that is consistently a certain percentage below the lender's standard variable rate.

 

Equity - the proportion of the property you actually own, - ie the property value less the mortgage loan outstanding.

 

Fixed rate - a rate of interest that is set at a certain level for a prescribed period of time, regardless of what happens to the lender's standard variable rate.

 

Flexible mortgage - a mortgage offering a number of flexible features, possibly including penalty-free lump-sum and regular overpayments, underpayments, payment holidays and drawdowns, as well as daily calculation of interest.

 

Guarantor - someone who agrees to guarantee your loan, and is fully liable for its repayment should you default. Some parents do this for their children when they buy their first home.

 

Homeloan - another word for mortgage.

 

Interest-only mortgage - a mortgage where you pay interest on the entire loan to the lender for the whole mortgage period, while putting money into a separate investment vehicle, which should grow to cover the amount of the loan.

 

Joint application - a mortgage application involving more than one person.

 

Key facts illustration – details the key facts of your mortgage quote.

 

LTV - loan to value , the proportion of the value or price of the property, whichever is the lower, that a lender is willing to offer you as a loan.

 

Mortgage term - the length of time over which you have agreed to pay back your mortgage usually 25 years.

 

Non-status loan - a loan granted without the lender enquiring as to your income or credit history. Also known as special status. Similar to Self-Certification.

 

Offer – A mortgage offer made to you by the lender.

 

Property for Life – our mortgage experts can help with your entire mortgage and finance requirements.

 

Quotation - a document detailing all the costs involved in taking out a particular mortgage deal, such as interest rates, monthly payments, fees and so on.

 

Remortgaging - otherwise known as refinancing. Arranging a new mortgage on your home, often with a different lender, perhaps to release some of the capital or get a better rate of interest.

 

Self-certification - where you state your level of income to the lender which it will generally accept with the minimum of checks.

 

Tracker rate - a loan with an interest rate that mirrors an established base rate, such as the Bank of England base rate or LIBOR.

 

Unencumbered – A property with 100% equity (no mortgage).

 

Variable rate - an interest rate that fluctuates in line with the general cost of borrowing.

 

Will – It is important to have a will if you are a mortgage holder.

 

X-change (really spelt exchange, but I couldn't find another x) – When purchasing a property, this is the point at which the solicitors exchange the contracts and you become legally obliged to complete the purchase.

 

Yield – The return on your property investment.

 

Z - Zzzzzz

 


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