Whether you are buying your first home, looking for a new property or simply remortgaging, you may come across unfamiliar terms and jargon that can be confusing.
Like many industries, the mortgage industry has it’s own language, and it can be overwhelming for first time buyers or even those who have been through the process before to understand it.
To help demystify some of the terms, we have created a mortgage jargon buster to help you understand the process and words that you will hear used during the process of buying your new home, applying for a mortgage or remortgaging.
We hope it helps! Pop any other words or terms that you would like us to bust in the comments and we will let you know the answers.
Helping you become mortgage ready.
AGREEMENT IN PRINCIPLE (AIP) – An Agreement in Principle (AIP), also known as a mortgage in principle, gives you an idea of how much you can borrow. You can show this to an estate agent, or to anyone selling a property, this shows that you are in a position to buy.
- STAMP DUTY – Stamp duty is the tax you pay when you purchase a property. The amount you need to pay will depend on your personal circumstances. We recommend you check the Government website when you are working out your Stamp Duty Stamp Duty Land Tax: Overview – GOV.UK (www.gov.uk) or Contact us for further advice. Contact a Mortgage broker in Basingstoke – MDJ Mortgages
- MORTGAGE DEPOSIT – This is the amount you need to pay towards the total purchase price. The value of this varies depending on the lender and the property.
- TRACKER RATE MORTGAGE – This is where your mortgage interest rate is set as a fixed % above the Bank of England base rate. The amount of interest payable will rise and fall with any changes to the Bank of England base rate.
- EARLY REPAYMENT CHARGE – Some mortgages, such as a fixed rate mortgage, charge a fee if you pay back your loan early. The amount can vary and will always be stated on the original letter of approval or in the Terms and Conditions.
- BASE RATE – Base rate is the rate of interest that is set by the Bank of England, this is what tracker mortgage rates and standard variable rates usually follow.
- LTV (LOAN TO VALUE) – Loan to Value is the size of your mortgage as a % of the value of the property. For example, if you have a £50,000 mortgage and your home is worth £100,000 the LTV is 50%.
- CONVEYANCING – This can be done by a solicitor or specialist-licensed conveyancer and is the legal process of buying and selling property.
- MORTGAGE ILLUSTRATION – This should be given to you before you make a mortgage application, it will describe the key things that you need to know about your mortgage including fees and payments.
- EQUITY – Equity is the difference between the current value of your home and the amount that is still left to pay on your mortgage.
More Mortgage Jargon Busters to come!
Whether you are a first time buyer, you are looking to remortgage or you are moving home by understanding the terms and what they mean, you’ll be better equipped to make an informed decision about your mortgage,
It is always a good idea to ask your mortgage broker any questions you have and clarify any terms you are uncertain about.
It is recommended that you take advice from an expert like a mortgage broker before you make any steps as it could save you a lot of money in the long run.
Contact us today for a FREE consultation.