It is the most popular form of repayment of a mortgage. A Repayment mortgage means that repayment of the mortgage includes capital and interest, that is after the last repayment the mortgage balance is nil, and the home becomes your own property.
It is a mortgage characterised by repayment of interest only, which means that instalments of a mortgage are lower. However, as only interest is repaid, your debt towards a lender is not reduced, and the amount borrowed remains the same throughout the term of the mortgage. You need to remember that at the end of term of a mortgage you have to pay back the amount borrowed back to a lender. You can use capital you have invested or funds acquired from a sale of the property. A mortgage of interest only type entails higher risk.
A fixed rate mortgage guarantees that your monthly payment will not change within a period set beforehand by a lender. The most popular periods of a fixed instalment are 2, 3 and 5 years. After the fixed rate period, your mortgage will revert to the standard variable rate. Do not worry though if you like fixed monthly payments as, towards the end of the fixed rate, we will help you find another fixed rate. However, this will be subject to your financial status at the time of review.
A tracker mortgage is a variable rate mortgage connected to a base rate of the BOE (Bank of England) or LIBOR (London Interbank Offered Rate). It means that any change of interest rate of BOE or LIBOR will cause a change of interest rate of our mortgage.
It is where the interest rate is discounted from the lender’s standard variable rate for an agreed period of time. Please remember therefore that a discounted rate will go up or down depending on changes to the lender’s standard variable rate, at the lender’s discretion. As a result, your monthly repayments will go up or down.
This is a standard variable interest rate. Its value is set individually by each lender. Variable interest rates can be amended at any time at the lenders discretion, but generally follows changes to the Bank of England base rate.
The early repayment charge specifies the amount of penalty for early repayment of a mortgage. Usually, it is a certain percentage of the value of a loan. It may be a fixed sum or a sum that is decreasing with time.
APR is an abbreviation of annual percentage rate and it means real annual interest rate of a loan. The APR allows you to compare the actual cost of borrowing over the life of the loan, for various mortgage products. However, its calculation assumes you will never review your mortgage, never move home and interest rates will never change, so it is not being the most important factor when comparing products.
LTV is an indicator specifying the relationship between the amount of a mortgage and the value of property. If home you are buying is worth GBP 100,000, and a lender grants you a mortgage of GBP 90,000, then the LTV is 90%. Generally, the lower the value of LTV, the lower the interest rate of the mortgage will be.
Decision in Principle (DIP) or Agreement in Principle (AIP) is the preliminary decision of a lender indicating the amount of mortgage they will make available to you. In order to obtain DIP (AIP), the lender performs a credit check on the borrowers, and their incomes and the amount of deposit are also taken into account.
This is a valuation on a property by an independent surveyor. If a property is valued below the agreed purchase price the lender may not consider it to be acceptable security for a mortgage, and may refuse to grant a mortgage. A basic valuation is a valuation of a property undertaken on behalf of the lender. A homebuyer’s report is an extended report undertaken on behalf of the borrowers. The report covers parts of property that are visible, or easily accessible. The report will contain recommendations concerning any defects or shortcomings. Full Structural Survey is a complete, structural survey on the state of property. It is relatively expensive, but guarantees that the state of property, including structure of the building, etc., is carefully checked, with any defects or shortcomings being highlighted in the report.
Conveyancing is the legal transfer of the ownership of the property from a seller to a buyer.
This is a tax charged on the purchase of property. The tax is charged as a percentage of the property value and the amount payable depends on a value of property. If you own more than one property, the purchase will also be subject to the second property stamp duty charge.
The term of a mortgage depends on a personal situation of an applicant. Most lenders require repayment of a mortgage before reaching retirement age. Currently, the retirement age for manual workers is 68 years but some lenders will consider longer terms depending on your occupation, and/or their potential pension income. The maximum term of a mortgage is 40 years.