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Glossary of Mortgage Terms

If you think getting a mortgage is confusing then here is probably the reason why. Let our easy to understand glossary of mortgage terms help translate the jargon that your constantly hearing and reading into something easier to grasp.

Advance – the advance is the mortgage loan itself

Annual Percentage Rate (APR) – we might have all heard of APR but few of us knows what it means, the APR is a percentage figure that is worked out by taking into account any costs involved over the entire term of your mortgage and the current interest rate, the APR will differ greatly from lender to lender, shop around for the best

Base Rate – the base rate is a rate set by the bank of England every money and this rate determines the rate of lending across the uk, thus this effects your mortgage 

Base Rate Tracker - tracker mortgages are special mortgages where the interest rate is variable and is set either above or below the base rate

Buy to Let Mortgage – a specialist mortgage that is specifically for property that will be bought to be let out to tenants

Capital – the capital is the amount of money that you have borrowed on your mortgage, this is on what the interest is charged

Capped Rate - this rate guarantees the maximum rate you will pay for a set amount of years, it falls with the base rate but if the base rate goes up you will only go up to the capped rate you agreed to but watch out for some capped rates have a maximum that your rate can drop too

Credit Reference Agency – this agency keeps records on you and your credit history, lenders are able to consult the agency and search to see if you have had any credit problems in the past or present

Current Account Mortgage – this type of mortgage is now very popular basically the rate of interest on your mortgage is calculated daily and any money that you have in your attached current account if offset against your mortgage

Early Redemption Penalty – this is the amount you will have to pay if you pay off your mortgage or make a large payment which greatly reduces your mortgage, normally there is a set out period in which this penalty can take place but check the small print to make sure that you are not tied in longer than you think

Endowment – an endowment mortgage was very popular in the 80's, it was basically a life insurance policy that would pay out money either upon the mortgage holders death or at the end of the mortgage to pay off either the final amount of the mortgage or a tax free sum of money but they have got a bad reputation due to the economy changing and many endowments not paying off the mortgage these were used most commonly with interest only mortgages

Fixed Rate - the fixed rate is an interest rate that stays the same fir a set number of years no matter what the base rate is, at the end of this time the lenders standard variable rate  will apply

High Lending Fee - if you are borrowing a high percentage mortgage for example 90% or above you will be charged this one off fee, this insures the lender in case you can't repay your mortgage and the repossessed property sells for less than what is left of the mortgage

Individual Savings Account (ISA) - these are investments that can be a tax efficient way of repaying an interest only mortgage

Interest - this is the money that the lenders charge you for borrowing

Interest Calculation - this is the frequency with which your lender calculates the interest left on the current balance of your mortgage, this can be daily, monthly or even annually

Interest Only Mortgage - this type of mortgage you only repay the interest that you are charged on the loan, but at the end of the mortgage you will be expected to repay your original loan amount, you would have to have an ISA or a similar investment or pension scheme to run along side it

Loan to Value (LTV) - like equity loan to value rate mortgages are a percentage that is based on the size of your mortgage, for example a £100,000 property with a mortgage of £50,000 would have a loan to value of 50%, the lower your LTV the better the rate you can get

Mortgage Deed - this is an agreement which gives the lender a legal right to the property should you not meet the repayments

Mortgage Indemnity Premium/Guarantee (MIP) or (MIG) - see High Lending Fee

Mortgage Term - the length of the mortgage itself, basically how many years or months you will have to repay your mortgage over

Portable Mortgage - a portable mortgage is one that you can without any penalties transfer if you move home

Redemption - the redemption is when you pay off your mortgage entirely

Release Fee - this is the fee that your lender will charge you to give you the title deeds to your home and complete the paperwork when you finish off paying your mortgage completely

Repayment Mortgage - this means that you will be repaying the loan amount and the interest off at the same time, this means that you are guaranteed to have paid of the mortgage at the end but interest rates can be higher

Retention -  the lender can hold back or retain some of the mortgage money until repairs have been carried out on the property

Sealing Fee - see Release Fee

Security - the security is the property which the mortgage is take out on, this is the lenders security for the loan, if you fail to meet your payments the lender will take possession of your property

Stamp Duty Land Tax- the tax that the government takes from anyone buying property that costs over a £120,000

Split Loan - a special mortgage that has some of the mortgage split between being on a repayment basis and an interest only basis

Standard Variable Rate (SVR) - most mortgages have a interest rate control period which controls how much the interest is on your mortgage but when this time ends the mortgage will go over to the lenders standard variable rate which is reflective of the movements in the economy as a whole

Title Deeds - the deeds are the legal papers which states who legally owns the property

Tracker Mortgage - see Base Rate Tracker