1. Annual Percentage Rate of Charge (APRC):
- The total cost of a mortgage, including interest and fees, expressed as an annual percentage. It helps compare different mortgage deals.
2. Arrangement Fee:
- A fee charged by lenders for setting up the mortgage. It can be paid upfront or added to the loan amount.
3. Base Rate:
- The interest rate set by the Bank of England, which influences the interest rates that lenders charge on mortgages.
4. Buy-to-Let Mortgage:
- A mortgage designed for properties that will be rented out to tenants rather than lived in by the borrower.
5. Capital:
- The amount of money borrowed to buy a property. This is the loan amount that needs to be repaid.
6. Conveyancing:
- The legal process of transferring ownership of a property from the seller to the buyer.
7. Early Repayment Charge (ERC):
- A fee charged if the borrower pays off the mortgage or makes overpayments beyond the allowed limit within a certain period.
8. Equity:
- The difference between the market value of the property and the outstanding mortgage balance. It represents the homeowner’s interest in the property.
9. Fixed-Rate Mortgage:
- A mortgage where the interest rate remains the same for a specified period, providing stability in monthly repayments.
10. Flexible Mortgage: – A mortgage that allows for overpayments, underpayments, and payment holidays, offering more flexibility to the borrower.
11. Interest-Only Mortgage: – A mortgage where the borrower pays only the interest on the loan each month. The capital is repaid at the end of the mortgage term, usually through a separate investment plan.
12. Loan-to-Value (LTV) Ratio: – The ratio of the loan amount to the property’s value, expressed as a percentage. A higher LTV means a higher risk for the lender.
13. Mortgage Deed: – A legal document outlining the terms and conditions of the mortgage, signed by the borrower.
14. Mortgage Term: – The length of time over which the mortgage must be repaid. Common terms are 25 or 30 years.
15. Offset Mortgage: – A mortgage where savings held in linked accounts are used to reduce the interest charged on the mortgage.
16. Repayment Mortgage: – A mortgage where monthly payments cover both the interest and capital, ensuring the loan is fully repaid by the end of the term.
17. Standard Variable Rate (SVR): – The lender’s default interest rate that applies once a fixed or introductory rate period ends. It can change at the lender’s discretion.
18. Tracker Mortgage: – A mortgage where the interest rate follows (or “tracks”) a specified external rate, usually the Bank of England base rate, plus a set percentage.
19. Valuation Survey: – A basic property inspection conducted by the lender to ensure the property is worth the loan amount.
20. Variable-Rate Mortgage: – A mortgage with an interest rate that can change over time, typically in line with market interest rates or the lender’s SVR.
This glossary covers the fundamental terms associated with mortgages in the UK, helping potential homebuyers and borrowers better understand the terminology involved in securing a mortgage.