Fenton Simpson

APRC

Annual Percentage Rate of Charge – is a representative interest rate designed to help you compare mortgages. It takes into account not only the introductory rate of interest you pay, but also the rate you pay when you finish your initial fixed, tracker or discount period , as well as any fees you are required to pay to get the mortgage.

Arrangement Fee

A set-up fee for your mortgage. Most mortgage lenders will allow you to add this fee to the loan, but this will mean you pay interest on it for the whole mortgage term

Arrears

If you go into arrears it means you have 'defaulted' at least once on your mortgage repayments, ie you have missed a month's payment. Contact your lender as soon as possible if you think you may go into arrears.

Base Rate

A rate of interest set monthly by the Bank of England which tracker and Standard Variable rate mortgages usually follow.

Broker

An adviser who can help to arrange your mortgage.

Buildings Insurance

Insurance to covers your property for any damage to its structure. It will be a condition of your mortgage to have Buildings Insurance in place. Fenton Simpson can arrange this for you.

Buy to Let

A property that is purchased with the sole intention of letting it out to tenants. There are special mortgages available for this purpose.

Capital

The amount of money you borrow to buy a property.

Capital and Interest

A type of mortgage where monthly repayments include capital repayments and interest, so that at the end of the mortgage term, your mortgage will be repaid in full.

Capped Rate

If your mortgage deal has a capped rate, the interest rate charged by your lender will never exceed the upper 'capped' limit, regardless of increases to the Bank of England base rate.

Cashback Mortgage

Your lender gives you a certain amount of cash on completion. You should factor this into the total cost of your mortgage over the initial period to decide whether it’s a good deal.

CCJ

County Court Judgement. These are made against you for non-payment of debt, and could make it harder for you to get a mortgage.

Conveyancing

The legal process you must go through when you buy or sell property. This can be done by a solicitor or licensed conveyancer. If you require legal assistance with your purchase please speak to your adviser for a recommendation.

Deposit

This is the amount you are required to put down yourself towards the cost of the property. The minimum deposit you will usually need is 5%, but the best value deals are available to people who can pay a deposit of at least 40%.

Discounted-rate Mortgage

A discounted-rate deal is one where the interest rate you are charged is a set amount less than your mortgage lender's standard variable rate (SVR). For example, if the lender has an SVR of 5.5% and the discount is 1%, then you will pay 4.5%.

Early Repayment Charges

Penalty fees you have to pay if you want to leave your mortgage during a specified period, usually the period of the initial deal.

Endowment Mortgage

A form of interest-only mortgage where you also pay money into a type of investment called an endowment to pay off the mortgage at the end of the term.

Equity

The amount of the property that you own outright, ie your deposit plus the capital you've paid off on your mortgage.

Exchange of Contracts

When the sale becomes legally binding and the completion date and price are fixed. No party can now pull out of the transaction without a financial penalty.

Family Offset Mortgage

Used by family members (usually parents) who want to help first-time buyers get onto the property ladder. Your savings are balanced against your child (or family member)'s debt, so the amount they owe and pay in interest is reduced.

Fixed-rate Mortgage

The mortgage interest rate stays the same for the initial period of the deal, which can be anything from one to 10 years. This means you can be sure of exactly what you will be paying on your mortgage each month, as your rate won't go up - or down - with the Bank of England base rate.

Flexible Mortgage

A flexible mortgage deal allows you to overpay, underpay or even take a payment holiday from your mortgage. This can help you pay your mortgage off early and save money on interest, but flexible mortgages are usually more expensive than conventional ones.

Freehold

If your property is freehold, then you own the building and the land it stands on.

Guarantor

A third party who agrees to meet the monthly mortgage repayments if you are unable to. This is more common with first-time buyers, with the guarantor likely to be their parent or guardian.

Help to Buy

The government has launched a number of different Help to Buy schemes, including equity loans, mortgage guarantees, Isas and specific schemes for Scotland and Wales. They all aim to make home-buying easier.

Higher Lending Charge

This is sometimes charged by your mortgage lender if you are borrowing more than 75% of the property’s value. It protects the lender against you defaulting on your mortgage.

Interest Only Mortgage

You only pay the interest on your mortgage each month, without repaying any of the capital loan itself. The idea is that you build up enough money to be able to pay off the mortgage at the end of the term in other ways - for example through investing in stocks and shares, pension endowment or the sale of another property.

Intermediary

An adviser who can help you arrange a mortgage.

Joint Mortgage

A mortgage taken out by two or more people. This might be used if you buy a house with a partner or friend, and can also be used by parents who want to help their children buy a property.

Land Registry

The official body responsible for maintaining details of property ownership.

Leasehold

You own the building but not the land it stands on, and only for a certain period (anything up to 999 years). You may find it hard to get a mortgage if there are fewer than 70 years left on the lease of the property you want to buy.

Loan to Value (LTV)

The size of your mortgage as a percentage of the property’s value. The best value deals tend to be available to people who are borrowing 60% or less.

Monthly Repayment

The amount you pay your mortgage lender each month. If you're on a repayment mortgage (the most common kind), the payment will cover a percentage of your mortgage plus interest.

Mortgage

A legal agreement by which a bank, building society, etc. lends money at interest in exchange for taking title of the debtor's property, with the condition that the conveyance of title becomes void upon the payment of the debt.

Mortgage Agreement in Principle

A document from a mortgage lender to show you will be able to borrow a certain amount. You can use this to prove to a seller that you can afford to buy their property.

Mortgage Deed

A formal contract between lender and borrower, outlining the legal obligations of the borrower and the rights the lender has if the borrower fails to make a repayment.

Mortgage Product

The deal that the lender provides to you for your repayments. The product will usually last 2, 3, 5 or 10 years.

Mortgage Term

The amount of time you are taking the mortgage out for; 25 years, for example.

Negative Equity

When the value of your home falls to a level which is below the amount remaining on your mortgage.

Offset Mortgage

An offset mortgage links your mortgage with your savings and, sometimes, your current account. Your credit balances are offset against your mortgage debt so you only pay interest on the difference, while also paying off the capital.

Portability

A portable mortgage will allow you to transfer your borrowing from one property to another if you move, without paying arrangement fees.

Rebuild Cost

For insurance purposes: the cost of rebuilding your home if it is destroyed.

Re-inspection fee

If your mortgage is released in stages and you are using it to renovate your home, this covers the new valuation we need to do after the work's carried out.

Remortgage

When you change your mortgage without moving house. You can do this to save money, to change to a different type of mortgage or to release equity from your home.

Repayment Mortgage

You pay off the mortgage interest and part of the capital of your loan each month. Unless you miss any repayments, you are guaranteed to have paid off the mortgage by the end of the term.

Repayment Vehicle

Required by lenders if you take out an interest-only mortgage, this is the means by which you're intending to pay off your mortgage at the end of the term - for example, another property, or a stocks and shares portfolio.

Shared Ownership

You buy a share of a property (usually between 25% and 75%) and pay rent on the remaining share, which is owned by the local housing association.

Stamp Duty

Stamp duty land tax is payable when you buy a property for more than £125,000 (or £40,000 if it's a buy-to-let property or second home).

Standard Variable Rate (SVR)

The default mortgage interest rate your lender will charge after your initial mortgage deal period ends. This could be higher or lower than your original rate.

Tie-in Period

This is the period during which you are 'locked in' to your mortgage deal. You'll have to pay an early repayment charge if you leave your mortgage during this period. Avoid mortgages that tie you in after your introductory rate has ended.

Tracker Mortgage

The interest rate on your mortgage tracks the Bank of England base rate at a set margin above or below it.

Valuation Survey

Lenders always carry out a valuation survey to check whether the property is worth roughly the amount you're paying for it. You should always have your own survey done too, to check for structural problems.

Variable Rate Mortgages

The interest rate on your mortgage can go up or down according to your lender’s standard variable rate.

Jargon Buster

Language and terminology can of be confusing, hopefully our Jargon Buster can be of assistance.