APR
Annual Percentage Rate. A way of comparing the cost of credit. It takes into account most of the up-front and on-going costs involved in taking out a mortgage.
Capital & Interest Mortgage
The monthly payments are partly to pay the interest on the loan and partly to repay the outstanding mortgage. Also known as a repayment mortgage.
Capped rate
An interest rate charged for a pre-defined period which can go up or down with the variable rate but there is a capped or maximum rate which it cannot go above.
Cashback
A payment received by the borrower when a mortgage is taken out. It may be a fixed amount or a percentage of the mortgage amount.
Conveyancing
The legal process involved in buying and selling a property.
Discounted rate
A guaranteed reduction in the standard variable mortgage rate, usually for an agreed period.
Endowment
A life assurance policy that is designed to produce a lump sum to pay off an interest-only mortgage.
Fixed rate
The interest charged on a mortgage is for a set amount for an agreed period.
Freehold
You own the property and land.
Interest only
The monthly payments to the lender are made up of interest only. The loan is not paid off during the term of the mortgage but at the end of the term from the proceeds of a separate investment plan.
ISA
Individual Savings Account. A tax-free way to own shares or unit trusts, savings account and life assurance. Can be used to repay an interest-only mortgage.
Leasehold
The property is owned for a set number of years after which ownership reverts back to the freeholder. Most flats in England are leasehold.
Level term assurance
Life assurance which pays out a lump sum if you die during the mortgage term. The amount of cover stays the same throughout which makes this type of life cover suitable for interest-only mortgages. |
LTV
Loan to value. The size of the mortgage as a percentage of the price being paid for the property. (e.g. a £45,000 mortgage on a property valued at £50,000 is an LTV of 90%)
MIG
Mortgage Indemnity Guarantee. Insurance that covers the lender in case your property is repossessed and the lender cannot get back their money. Also known as MGI (Mortgage Guarantee Insurance).
MIRAS
Mortgage Interest Relief at Source. Tax relief on your mortgage interest payments. MIRAS was abolished in April 2000.
Mortgage
A loan to buy property where the property is security against the loan not being repaid.
Negative Equity
The money owed on the mortgage is greater than the value of the property.
PEP
Personal Equity Plan. Now replaced by the ISA.
Personal Pension
A structured personal savings and investment plan to provide for financial needs after retirement. Some or all of a pension plan can be used to repay an interest-only mortgage.
Repayment
The monthly payments on a mortgage are used to pay the interest on the loan and partly to repay the outstanding mortgage.
Sealing Fee
A charge made by lenders when a mortgage is repaid.
Stamp duty
A tax paid when purchasing a property which costs over £60,000. Usually a percentage of the property value and charged in valuation bands.
Structural survey
A comprehensive examination by a surveyor of the outside and inside of a property. This is an optional wide ranging check of the property and is paid for by the borrower.
Variable rate
The interest rate charged by the lender can go up and down with bank base rates. The monthly repayments change accordingly.
Valuation
A basic check of the property to find its value and assess whether it is suitable to mortgage. The survey is carried out by a surveyor on behalf of the lender and is paid for by the borrower. |
