All the phrases you’ll need when arranging a mortgage:
Also check out our FAQ page.
Agreement in Principle (AIP)
Sometimes called a Decision in Principle (DIP) or Mortgage in Principle. A statement from a lender saying in principle you can borrow a certain amount based on some basic information submitted. Sent before an application and can be used as proof to a seller that you can afford the property.
Annual Percentage Rate. The total cost of the mortgage including fees, based on the whole term of the mortgage. Not to be used when comparing new deals.
Also called a Lenders Fee. The fee lenders charge to setup the mortgage.
If you have missed a payment then you have defaulted and if you have defaulted at least more than once then you have gone into arrears. This is serious and if you have a mortgage you should contact your lender before, if you think you might go into arrears.
Buy to Let. A property bought to rent out to tenants as an income and a long term investment.
If you have a low credit score or credit report then this will impact the lenders who will consider an application from you. Bad credit can come from simple mistakes like too many credit searches through to missed payments on credit cards or utility bills. We can help source mortgages if you have bad credit.
A insurance to cover your home against structural damage, required when taking out a mortgage.
The amount borrowed.
The interest rate will never go above the agreed capped rate, during the capped period of the mortgage.
When you complete on a mortgage the lender will give back an amount of cash. This is not necessarily the best deal but we will take this into account when finding a mortgage for you.
If interest rates fall below a certain level, then a collar will not fall any lower than the agreed level. Can be part of Capped and Collared mortgage.
A County Court Judgement is registered against you for a unpaid or overdue debt. Can make it harder to find a lender but we can source mortgages from lenders who consider applications with adverse credit.
The legal process of buying or selling a home. We can recommend a solicitor or conveyancing from a list of firms.
Current Mortgage Account
All your accounts are combined into one. Usually your current, saving, credit and mortgage accounts, means you pay interest on the difference between the credit and debit amounts.
Amount of money you put down towards the cost of the property, usually from savings or equity in previous property. Minimum deposit 5% of property value, better rates start from 15% and best rates from 40%.
Early Repayment Charges are the fees payable to the lender if you leave your mortgage early, usually during a deal period and for a % of the mortgage amount.
Type of interest only mortgage where there is an investment element called a endowment which you pay into on the basis it should repay the mortgage at the end of the term.
The difference between the property value and the mortgage outstanding, the amount you own outright i.e. deposit amount plus any capital repaid.
Fixed Rate Mortgage
The interest rate of the mortgage stays fixed for an agreed period generally 2/3/5 years. Means the payments are same throughout and you know exactly what you are paying each month.
More expensive than conventional mortgages. Can under or overpay the mortgage without penalty, to help with situations such as changing income.
Owning both the property and land on the title.
Most common with first time buyers, guarantor agrees to pay mortgage repayments if you are unable to. They are also liable for the mortgage amount.
Help to Buy
Government schemes to help you get on the property ladder and make home buying easier.
Interest Only Mortgage
You only repay on the interest owed and not the capital. Most lenders require a credible strategy to repay at the end of the term.
Where two people take out a mortgage together.
Government body for registering and maintaining records of land and property ownership.
Unlike freehold (where you own the building and land) you only own the land. This can be any number of years up to 999.
Loan to Value. This is the property value compared to the mortgage amount as a percentage.
How much you will be paying your lender each month, this is the interest owed plus a % of the capital outstanding.
Legal document that gives the lender a right of possession on your home while the mortgage is in effect.
The length of time your mortgage will run for.
Similar to a flexible mortgage but only links your mortgage account to your savings account. You only pay the interest on the difference between the two.
If your mortgage has this feature when you move house you can move your mortgage with it, saving on arrangement fees.
Staying at your home but changing your mortgage, most likely for a better interest rate or to release equity.
Sometimes called a Capital and Interest mortgage. You are paying both the interest and capital each month. At the end of the mortgage term you will have repaid the mortgage and have nothing outstanding unless you miss any payments.
Right to Buy
Originally for council tenants to buy the council homes they live in, now also available for housing association tenants too.
If you own a leasehold property this is a charge from the freeholder, usually for the repair and upkeep of the common areas in the property.
You buy a percentage of a property from a housing association, usually at 25/50/75%, can also buy more at a later date for the latest market value.
Called Stamp Duty Land Tax, becomes payable on properties valued over £125’000 (£40’000 on second homes/BTL). Surcharges apply for buy to lets and limited company purchases.
Standard Variable Rate – SVR
Interest rate determined by the mortgage lender based on bank rate and lenders own conditions. Usually starts after a fixed rate or similar deal finishes.
Tie in Period
Some lenders tie you in after your original fixed rate or similar ends so you pay a penalty fee for leaving the mortgage.
Changes with England bank base rate.
Used by lenders to check the property is worth the value stated or purchase price. More expensive valuations can check to see if there are structural problems too.