Advice If you get mortgage advice, a mortgage adviser will recommend what mortgage is suitable for you. This will be made by an adviser who is regulated by the Financial Conduct Authority.
Annual Percentage Rate of Change (APRC) The overall cost of a mortgage, including interest and fees.
Approved in Principle / Agreement in Principle Also known as a Decision in Principle (DIP) or mortgage promise. This is a statement from a lender detailing the amount they are willing to lend to you before you’ve finalised the purchase of your home. This is not a guarantee but can be helpful when registering with estate agents.
Discounted Variable Rate Mortgage This mortgage is fixed at a set discount percentage below a lender’s standard variable rate, for a set amount of time. However, the amount you pay each month could change.
An early repayment charge is a penalty applied if you repay your mortgage (or overpay more than is allowed) during a tie-in period. You may be charged this fee for a multitude of reasons:
You want to reduce the amount you’ve borrowed, perhaps by paying off a lump sum.
If you’ve got a mortgage with a fixed, capped or discounted interest rate product, your mortgage lender may ask for an early repayment charge if you overpay during the term of the special rate product. However, the charging period might sometimes run beyond that point.
If you change to a different mortgage interest rate product before your current one expires.
Financial Conduct Authority This is the body that regulates the financial services industry in the UK.
Fixed Rate Mortgage This means that a fixed interest rate is applied to your mortgage for a predetermined time.
Flexibility A flexible mortgage is a type of mortgage that could allow you to make overpayments, underpayments and perhaps take payment holidays to suit your financial situation. Your Financial Consultant will be able to advise you about the different options available.
Higher Lending Charge A higher lending charge is a fee that may be applied by lenders if you are borrowing over a certain percentage of a property value. This is generally for insurance purposes to protect lenders from a financial loss if you fall behind with repayments. For example, a lender may choose to impose an extra charge on borrowers who borrow more than 80% of a property’s value.
Interest Only Mortgage With an interest-only mortgage, your monthly payment covers only the interest charges on your loan, not any of the original capital borrowed. It is therefore your responsibility as a borrower to ensure that you have a method or means of repaying the capital at the end of the term.
Lender’s Arrangement Fee This is a fee that may or may not be charged by the lender to cover administration costs to set up your mortgage.
Lender’s Standard Variable Rate When your existing mortgage deal comes to an end, you’ll then move on to your lender’s standard variable rate. All mortgage lenders have an SVR (Standard Variable Rate) – it’s just the normal interest rate charged by the lender on mortgages without discounts or deals.
Loan To Value Ratio The loan-to-value is the ratio between the value of the loan you take out and the value of the property as a whole, expressed as a percentage. The remaining value gets paid as your deposit.
To work out the (LTV), just take the amount you need to borrow, divide it by the value of the property and then multiply by 100 to get its percentage value.
For example, if the property is worth £200,000 and you need to borrow £180,000 for the mortgage than your LTV is 90%.
Repayment Mortgage A repayment mortgage tends to be the most common type of mortgage taken out by lenders. With this style of mortgage, you repay a bit of the capital (the amount you borrowed) along with some interest each month. As long as you meet all your monthly payments you’re guaranteed to have repaid your entire loan by the end of the mortgage term, which is usually around 25 years.
Valuation Fee Valuation fees are charged by your mortgage lender for commissioning a mortgage valuation. The report that is produced from this valuation is solely for the lender’s benefit and is used to assess the suitability of the property to act as security for the mortgage.