Mortgages come with their fair share of terminology, it can quickly start to feel like another language.
We've put together some of the terms you're most likely to come across, with simple explanations of what they actually mean.
And if there's anything you're unsure about, just ask. We're always happy to explain.
A loan used to purchase a property, usually repaid monthly over an agreed number of years. The loan is secured against the property.
The amount of money you put towards buying the property yourself. Your mortgage usually covers the remaining amount.
The length of time over which you agree to repay your mortgage, for example 25, 30 or 35 years.
A mortgage where your monthly payments go towards both the interest charged and repaying the amount you've borrowed. Provided all required payments are made, the mortgage should be repaid by the end of the term.
Interest-Only Mortgage
A mortgage where your monthly payments generally cover the interest charged rather than reducing the original amount borrowed. You'll need an acceptable repayment strategy to repay the outstanding balance at the end of the mortgage term.
Before You Buy
AIP / Agreement in Principle
Sometimes called a Decision in Principle or Mortgage in Principle. It's an indication from a lender of how much they may be willing to lend based on some initial information and checks.
An AIP isn't a guarantee that you'll ultimately be approved for a mortgage.
LTV / Loan-to-Value
The percentage of the property's value that you're borrowing.
For example, if you bought a £200,000 property with a £20,000 deposit, you'd need to borrow £180,000. That would give you a 90% LTV.
Affordability
The assessment a lender carries out to determine how much they may be prepared to lend you. This can consider your income, expenditure, financial commitments and other circumstances.
Credit Check
A review of your credit history and financial information. Lenders use credit checks as part of deciding whether they're prepared to lend to you.
Conveyancing
The legal work involved in transferring ownership of a property from one person to another. This is usually carried out by a solicitor or licensed conveyancer.
Survey
An inspection of a property's condition carried out by a qualified surveyor. Different levels of survey are available depending on the property and how detailed an assessment you require.
Understanding Your Mortgage
Fixed Rate
A mortgage where the interest rate is fixed for an agreed period. Your mortgage payments won't change because of interest-rate movements during that fixed-rate period, although they may change afterwards.
Variable Rate
A mortgage where the interest rate can change, meaning your monthly mortgage payments may increase or decrease.
SVR (Standard Variable Rate)
The standard variable rate is an interest rate set by your mortgage lender. It can change over time at the lender’s discretion and isn’t directly linked to the Bank of England base rate in the same way as a tracker mortgage. You may move onto your lender’s SVR when an initial mortgage deal, such as a fixed or discounted rate, comes to an end, unless you arrange a new deal.
Tracker Mortgage
A type of variable-rate mortgage where the interest rate typically follows a specified external rate, such as the Bank of England base rate, plus an agreed percentage.
APRC / Annual Percentage Rate of Charge
A figure designed to show the overall annual cost of a mortgage over its full term, taking into account the interest rate and certain fees and charges.
ERC / Early Repayment Charge
A fee that may apply if you repay some or all of your mortgage, or switch to another mortgage, during a period in which early repayment charges apply.
Overpayment
Paying more towards your mortgage than your required monthly payment. Some mortgages allow overpayments up to certain limits without a charge, while restrictions or charges may apply to others.
Moving & Remortgaging
Remortgage
Moving your mortgage to a new deal, usually without moving home. This might involve changing lender, although existing customers may also be able to switch products with their current lender.
Product Transfer
Moving onto another mortgage product with your existing lender rather than changing to a different lender.
Porting
Taking an existing mortgage product with you when you move to another property, where your lender and mortgage terms allow it. Porting is still normally subject to the lender's criteria and affordability assessment.
Additional Borrowing
Borrowing additional money secured against your property, subject to your lender's requirements and affordability checks.
Equity
Broadly, the difference between the current value of your property and the amount you still owe on borrowing secured against it.
Buying a Property
Freehold
A form of property ownership where you generally own both the property and the land it stands on outright.
Leasehold
A form of ownership where you own the property for the remaining period of a lease, while another party owns the freehold. Leasehold properties can come with additional charges and conditions.
Exchange of Contracts
The stage of a property purchase in England and Wales when signed contracts are exchanged between the buyer and seller. At this point, the transaction normally becomes legally binding.
Completion
The point at which the property purchase is completed, funds are transferred and ownership passes to the buyer.
Or, more importantly...
The day you get the keys.
Chain
A series of linked property transactions where one person's purchase depends on another property being bought or sold.
Stamp Duty
A tax that may be payable when purchasing property. In England and Northern Ireland this is called Stamp Duty Land Tax (SDLT). Different property taxes apply in Scotland and Wales.
The amount payable depends on your circumstances, the property and the rules in force at the time.
Protection & Insurance
Life Insurance
Cover designed to provide a financial payment if the insured person dies during the policy term, subject to the terms and conditions of the policy.
Critical Illness Cover
Cover designed to provide a payment if you're diagnosed with a specified critical illness that meets the definition set out in your policy.
Income Protection
Insurance designed to provide a regular income if you're unable to work because of illness or injury, subject to the terms and conditions of the policy.
Buildings Insurance
Insurance designed to cover the structure of your home against certain insured events. Buildings insurance will normally be required by a mortgage lender.
Contents Insurance
Insurance designed to protect belongings within your home against certain insured events, subject to the cover and terms of your policy.
Premium
The amount you pay for an insurance policy, usually monthly or annually.
You don't need to become a mortgage expert to get a mortgage. That's our job.
If you've come across something you don't understand, or you're simply ready to start exploring your options, get in touch. We'll explain things clearly and help you understand what comes next.
