There are many different terms used throughout the industry of mortgage brokers and estate agents that you may not fully understand. It is very important to understand what all these terms mean before looking for a mortgage so you know what offers you the best possible deal.
To help you learn more about the different terms used through out this industry there is a glossary below explaining different phrases and terms often used and very important to understand.
- Annual Percentage Rate (APR) – This is used in many instances where people are lending and is a good way of comparing the value of one company to the next because not only does it include the annual interest but also any other fees or charges there may be.
- Buy to let mortgage – This is a mortgage taken out by an individual that wants to rent the property out once purchased to someone that will give them a rental income. The rental income is usually more expensive than the actual cost of the mortgage so many people are now taking to this kind of mortgage as an investment.
- Capped rate – This means that the rate is fixed at a certain amount and cannot rise above that within a certain time period but it can fall during that time.
- Endowment mortgage – This type of mortgage provides the person with an interest only mortgage but they will also be paying premiums each month into a life assurance policy. The idea is suppose to be that they will be able to pay off the mortgage loan at the end of the term and also have money left spare in their life assurance policy that will have no tax deducted from it. However, these policies are not always guaranteed to mature to the full amount of the original loan by the end of the term.
- Loan to value (LTV) – This means they would lend an amount to a certain percentage of what the property has been valued at, for example if a property was valued at £100,000 then they were offered LTV of 80% they would receive a loan of £80,000.
- Redemption – This is when the mortgage loan has been paid back fully.
- Tie in period – This is an amount of time you will be required to stay with the mortgage lender for after taking a mortgage out with them, if you decide to pay back your mortgage before this time then you may face a penalty charge.
- Valuation
– This is a series of checks carried out on the property by the lender to determine what the exact value of the property at that time is and how much there needs to be done in the way of repairs etc. This shouldn’t be confused with a home buyer survey as it doesn’t give any detailed information on the actual state of the structure and safety of the property.