Mortgage jargon buster
Taking the mystery out of mortgages
Your home or property may be repossessed if you do not keep up repayments on your mortgage
C
Capital and Interest Payment
Your monthly payment covers the interest and also reduces the total balance outstanding.
CHAPS Fee
A fee to cover the cost of electronically transferring the mortgage funds to the borrower.
Conveyancing
Is the legal process of buying and selling property. This can be done by an Advocate or specialist-licensed conveyancer.
Cost of Credit
The difference between the amount you borrow and the amount you’ll end up paying back taking into account interest and other charges.
D
Deposit
The amount you need to pay yourself towards the cost of the property. This varies depending on the product and lender.
E
Early Repayment Charge (ERC)
Some mortgages, such as a fixed rate mortgage, charge a fee if you pay back the loan early. This can vary, so check your original letter of approval or terms and conditions for the amount. This is known as an Early Repayment Charge (ERC).
Equity
Is the difference between the current value of your home and the amount outstanding on your mortgage.
Exit Fee
This is an administration fee payable to service providers when you fully repay your mortgage.
G
Gazumping
Gazumping occurs when a seller accepts an oral offer (a promise to purchase) on the property from one potential buyer, but then accepts a higher offer from someone else. It can also refer to the seller raising the asking price or asking for more money at the last minute, after previously orally agreeing to a lower one. In either case, the original buyer is left in a bad situation, and either has to offer a higher price or lose the purchase.
J
Joint Applicants/ Joint Mortgages
This is where you hold property ownership rights equally with another person or persons. If one person dies, ownership reverts entirely to the surviving person or persons. This legal agreement supersedes any Will the deceased may have made.
L
Leasehold
You own the property but not the land it is built on for a specific number of years. Flats are usually owned on a leasehold basis. You may find it hard to get a mortgage if there are fewer than 70 years left on the lease of the property you want to buy. Leases are renegotiable, but the shorter remaining terms, the more expensive it will usually be.
LTV (Loan to Value)
LTV means Loan to Value. The size of your mortgage as a percentage of the value of your property. for instance, if you have £50,000 mortgage and your home is worth £100,000, your LTV is 50%.
M
Maturity Date
The date the mortgage must be repaid in full, or by which a new agreement needs to be taken out.
Monthly Repayment
The amount you pay to your lender for your mortgage each month.
Mortgage Offer
This is your guaranteed offer. Once your mortgage is approved you'll get a formal offer setting out the terms and conditions.
Mortgage Term
The amount of time you are repaying your mortgage over (e.g. 25 years).
N
Negative Equity
When the value of your home falls below the amount of your mortgage.
O
Overpayment
This is when you pay extra, over and above your monthly mortgage payment. Overpayments save you interest and may help you to pay your mortgage off sooner.
S
Standard Variable Rate
The default mortgage interest rate your lender will charge you after your initial mortgage deal ends and you choose not to take a new fixed or tracker rate deal.
Service fee
The fee charged by a lender who, with the customer's written consent, requests details from their existing mortgage lender.
T
Tracker Rate Mortgage
The mortgage interest rate is set at a fixed percentage above the Bank's base rate, which usually tracks the Bank of England (BoE) base rate. The interest rate payable will rise and fall in line with changes to the Bank's base rate.
V
Valuation
Mortgage lenders require a valuation to prove that the property is worth the amount you want to borrow.
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