Advice
- A recommendation about
the most suitable mortgage for you made by an adviser who is regulated by the FSA.
Annual statement -A statement from your
mortgage lender, sent every year, showing among other things what you've paid and
what you still owe.
Approval in principle - A certificate which
some lenders will give you that shows the amount they will probably be prepared
to lend you. This is not a guarantee, but can be helpful when signing up with estate
agents.
APR - Annual Percentage Rate.
This shows the overall cost of a loan, taking into account the term, interest rate
and other costs.
Authorised firm - A firm that has permission
from the FSA to carry out regulated activities.
Capital - The amount you borrow
to help buy your home.
Capped mortgage - A mortgage that has a
maximum limit on the interest rate you'll have to pay during a special deal period.
Cashback mortgage - A mortgage
that comes with a cash sum (often a percentage of the amount you're borrowing).
Collared mortgage - A mortgage with a minimum
interest rate you'll pay during a deal period.
Debt Consolidation - Where debts
such as credit cards & personal loans are added to a mortgage in order to reduce
outgoings. But normallywill increase the overall amount paid as well as the term
they are repaid over.
Deposit - The amount of money that
you're putting into buying a home (not including the mortgage money you're borrowing).
Discounted mortgage - This has a discounted
variable rate of interest for a set period, after which the rate will increase.
Early repayment charge - A charge
you may have to pay if you break off a mortgage deal - by paying it back early and/or
moving to another lender.
Fixed rate - An interest rate that
is fixed (ie it doesn't move up or down) for a set period of time.
FSA - The Financial Services
Authority - the UK's financial watchdog.
Income multiples - The factor by which your
earnings are multiplied to find out how much you can borrow.
Interest - The charge made by lenders
when you borrow their money.
Interest rate - The figure that determines
how much interest you pay. Usually linked to the Bank of England's rates and can
move up or down.
Interest-only mortgage - As the name suggests, your monthly payment only pays the interest
charges on your loan - you're not actually reducing the loan itself. This is why
it's very important you arrange some other way to repay the loan at the end of the
term; for example, through an investment or savings plan, which will have to be
regularly checked as it m,ay not reach the target amount.
The pros: Because you're only paying
off the interest, and not the loan itself, your monthly payments will be lower.
The cons: That debt is not going to go away. Throughout the life of the mortgage,
you'll need to check your investment or savings plan is on track to repay your loan
at the end of the term. If you can't repay it at the end of the term you could lose
your home.
documents - Standard documents
that all authorised lenders and brokers must give you to explain their services
and details about the mortgage you're interested in.
Loan-to-value - The percentage of money
you want to borrow compared to the cost of the property.
Mortgage - A loan which is secured
against your property.
Mortgage broker - A mortgage broker helps
you understand the various mortgage types and deals available to them
Register - A list of firms that are regulated to
carry out financial services in the UK. You can check online to see whether a firm
is regulated by checking the FSA Register @ www.fsa.gov.uk/register and follow the links
Remortgaging - The process of changing
your mortgage for a different one, without moving home.
Repayment mortgage - A mortgage that pays
off both the home loan and the interest at the same time. Make all the payments
and the mortgage will be fully repaid. Every month, your payments to the lender
go towards reducing the amount you owe as well as paying the interest they charge.
So each month you're paying off a small part of your mortgage.
The pros: It's a simple,
clear approach - you can see your loan getting smaller.
The cons: In the early years your payments will be mainly interest,
so if you want to repay the mortgage or move house in the early years, you'll find
that the amount you owe won't have gone down by very much.
Secured - A mortgage is a secured
loan on your home; this means that if you fail to repay it, your lender may be able
to sell your home to get its money back.
Self Certification - where you
do not supply income & employment details to the lender and self cerify
that the loan is affordable. Your mortgage broker will still need to see evidence
of this.
Stamp duty - A tax which home buyers
must pay on properties above a government set figure.
Standard variable rate mortgage - A loan at the lender's normal mortgage rate - ie without any discounts
or deals.
Sub Prime mortgages - An event or series of events may have impaired your credit
rating and it will be necessary to apply for a Sub Prime mortgage. These normally
have a higher interest rate than Prime morrgages and may carry heavier charges.
Survey - A report on the condition of the property you are planning to buy.
Tracker mortgage - A mortgage with an interest
rate that is usually linked to a particular rate that is set independently from
the lender and moves up or down with it.
Term - The length of your mortgage.
Valuation - A brief inspection,
for the benefit of your lender, of the home you hope to buy. This is to make sure
they are not lending more than the property is worth and that the property is suitable
security for the mortgage, but this will not tell you if it is a good or bad buy.
For your own peace of mind, you may want your own survey.