Mortgage glossary

A glossary of mortgage terms

It can be helpful having a working knowledge of mortgage glossary terms when dealing with mortgage professionals. Here’s a list of some words and terms you may hear when talking about mortgages.

APR – The annual percentage rate is the interest rate spread over a year, usually in regards to mortgage loan repaymentsArrangement fee – This is the amount the lender charges for organising your mortgage; it can also be called the booking fee or application fee.

Arrears – If you are behind with mortgage payments you are in arrears. If you’re in arrears for a long time you could lose your home.

Base rate – The interest rate set by the Bank of England and used as a benchmark for tracker mortgages, variable-rate mortgages and the lender’s own standard variable rate (SVR). \

Booking fee – Another name for the arrangement fee.

Buy-to-let – A buy-to-let property is one specifically bought in order to rent it out. A buy-to-let mortgage is available for buy-to-let properties.

Capital – The amount of money borrowed for a mortgage.

Credit rating or credit score – Everyone who borrows money is given a score depending on their history of paying back debts. The higher the score, the better your credit history.

Early repayment charges – A charge levied by lender if you want to leave your mortgage deal early.

Equity – The difference between the value of a property and the mortgage outstanding on it.

Fixed-rate mortgage – A mortgage where the interest rate is fixed for a set period of time, normally around two to five years.

Guarantor – A nominated person who is legally bound to make your mortgage payments if you fail to do so.

Higher lending charge – If the mortgage is more than 90% of a property’s value, then the lender may charge this fee, though it’s rare nowadays.

Interest-only mortgage – A mortgage that allows you to only pay the interest on the loan amount. The loan amount itself is paid at the end of the mortgage term.

Key facts illustration – The main elements of a mortgage clearly set out so you are able to easily understand the terms of your mortgage, including, among other things, the overall cost of the mortgage with interest, the monthly repayments and fees charged.

Loan-to-value (LTV) – The loan amount of a mortgage set out as a proportion of the property’s value.

Mortgage term – The agreed time period in which a mortgage will be paid back.

Negative equity – Where the value of a property is less than the outstanding mortgage.

Offset mortgage – A mortgage where your savings are offset against the amount borrowed in order to pay less interest.

Overpayments – Usually, lenders will let you make additional payments of up to 10% of the total loan given. These overpayments will decrease the interest paid as well as the length of the mortgage.

Remortgage – Renegotiating the existing mortgage on a property with a lender.

Repayment mortgage – A standard mortgage where you pay back both the loan amount (capital) and the interest charged with it. Once paid, you own the property.

Tracker mortgage – A mortgage where the interest charged tracks the Bank of England base rate and, as such, can rise or fall.

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