Jargon Buster

Getting a mortgage can be a real headache, whether you're a first-time buyer or you've done it before. All the technical terms can be super confusing. So, we put together this glossary to help you understand all the mortgage jargon you might come across when you're applying.. From “Advance” to “Valuation,” we’ll break down the key terms and concepts to empower you to make informed decisions throughout the mortgage process.

The “Advance” refers to the amount of money you borrow from the lender to purchase a property. It represents the total loan amount you will be responsible for repaying over the agreed-upon mortgage term.

The Annual Percentage Rate of Charge (APRC) is a crucial metric used to compare different mortgage offers from various lenders. It takes into account not only the interest rate on the loan but also any additional fees or charges associated with the mortgage. By considering the APRC, you can get a more accurate picture of the overall cost of borrowing.

An “Arrangement Fee” is a charge imposed by some mortgage lenders to cover the administrative costs associated with setting up the mortgage. It is usually a one-time payment and can be added to the mortgage balance or paid upfront.

The “Asking Price” refers to the price at which the seller lists the property for sale. It represents the amount the seller hopes to receive from the buyer.

Buildings insurance is a type of insurance coverage that protects the structure of your property against damage caused by events such as fire, storms, or floods. Most mortgage lenders require borrowers to have adequate buildings insurance to safeguard their investment.

A “Buy to Let Mortgage” is a type of mortgage specifically designed for individuals who want to purchase a property with the intention of letting it out to tenants. Buy to Let mortgages often have different terms and conditions compared to residential mortgages.

“Completion” refers to the final stage of the property purchase process when ownership of the property is legally transferred from the seller to the buyer. It is the point at which the buyer becomes the official owner of the property.

The “Deposit” is the upfront payment made by the buyer when purchasing a property. It represents a percentage of the property’s purchase price and is typically paid from the buyer’s own savings. The sise of the deposit can impact the mortgage options available and the interest rate offered by lenders.

“Equity” is the difference between the current market value of a property and the outstanding mortgage balance. It represents the portion of the property that you own outright. As you pay off your mortgage and the property value increases, your equity in the property grows.

A “Fixed Rate” mortgage is a type of mortgage where the interest rate remains fixed for a specified period, typically between 2 to 5 years. This means that your monthly mortgage payments will remain the same throughout the fixed-rate period, providing stability and predictability.

“Freehold” refers to the complete ownership of both the property and the land it stands on. As a freeholder, you have full control and responsibility for the property and the land.

“Gazumping” occurs when a seller accepts a higher offer from a different buyer after accepting an initial offer from another buyer. It can be a frustrating experience for the original buyer who may have already invested time and money into the purchase process.

With an “Interest-Only Mortgage,” your monthly payments only cover the interest portion of the loan, and the principal amount remains unchanged. At the end of the mortgage term, you will need to repay the original loan amount in full.

The “Loan to Value” ratio represents the percentage of the property’s value that is financed through a mortgage. For example, if you are purchasing a property worth £250,000 with a £200,000 mortgage, the LTV would be 80%.

Mortgage Agreement: A “Mortgage Agreement” is a document that outlines the terms and conditions of the mortgage between the borrower and the lender. It sets out the details of the loan amount, interest rate, repayment schedule, and other important information.

Portability: “Mortgage Portability” refers to the ability to transfer your existing mortgage from one property to another when you move. This can be beneficial if you want to avoid early repayment charges and maintain the terms and conditions of your original mortgage.

“Redemption” refers to the complete repayment of a mortgage loan. This can occur when the mortgage term comes to an end, or when the borrower decides to pay off the mortgage early.

“Remortgaging” is the process of switching your existing mortgage to a new mortgage deal, either with the same lender or a different one. This can be done to secure a lower interest rate, release equity, or change the terms of the mortgage.

The “Standard Variable Rate” is the default interest rate set by the lender once any initial fixed or discounted rate period ends. SVRs can fluctuate and are influenced by changes in the base rate and market conditions.

The “Term” refers to the agreed-upon length of time over which you will repay the mortgage. It is typically expressed in years, with common mortgage terms ranging from 25 to 30 years.

A “Valuation” is an assessment of the property’s value conducted by a qualified surveyor. It is often required by mortgage lenders to ensure the property provides sufficient security for the loan. Valuations can vary depending on the purpose, such as a basic valuation or a more detailed survey.

Getting a mortgage can be confusing, but don't worry! Learning key mortgage terms will make it way easier. This guide will help you understand the lingo so you can make smart choices and chat confidently with mortgage pros. Remember, if you're ever unsure about something, just ask! Understanding mortgage talk will help you get the best deal and finally own your dream home.