Mortgage jargon

An interest only (IO) mortgage is where you only repay the interest each month and do not reduce the amount of the loan itself.

A repayment mortgage is where you pay off the initial loan and the interest that accumulates each month.

Mortgage indemnity is a type of mortgage insurance that you pay for but which benefits the lender if you borrow a high proportion of your property’s value and can’t repay the mortgage.

The Financial Conduct Authority (FCA) is the financial services regulator in the UK and replaces the Financial Services Authority (FSA).

A remortgage is changing your mortgage without moving house. Fees may have to be paid to do this.

A part and part mortgage is where some of the loan is on interest only and some on repayment.

A tracker rate mortgage is a mortgage that is linked to the Bank of England’s base rate. The rate payable with the bank base plus a certain percentage. This means that when the base rate moves so will your mortgage rate.

A fixed rate mortgage does what it says on the tin.

The APR (Annual Percentage Rate) shows the overall cost of borrowing on a credit card or loan. This takes into account fees and/or set up charges.

FEE JARGON

A valuation fee pays for a surveyor to look at the property on behalf of the lender to see if it’s worth what you’re paying for it and therefore if it’s good security for the lender. There are different levels and we will look at these in a bit more detail in a blog.

An arrangement fee is the fee that you pay a lender, e.g. a bank or building society, to set up a mortgage for you.

Booking fee: lenders put aside pots of money for certain details that they offer. The money for these deals can be limited therefore you have to pay an upfront booking fee to make sure that you secure some of those funds.

Telegraphic Transfer (TT) is the fee that the lender charges to send the money to the solicitors to complete the purchase/remortgage.

Mortgage account fee – the fee that the lender charges for closing the mortgage account when you clear the mortgage. It is always quoted at the time of taking out the mortgage even though it is not payable until the mortgage is cleared.

Broker fee – a fee charged by a mortgage broker to source the best mortgage for you, help with the various forms and to get you the mortgage offer.

Conveyancing fee – the legal process involved with house purchase is called conveyancing so this is the fee charged by the solicitor or licenced conveyancer to complete the legal work.

LTV Loan to Value is a percentage. What percentage of the property do you need to borrow? The higher the LTV the higher the risk to the lender and therefore the higher the rate, e.g.a 95% mortgage will attract a higher rate of interest than a 50% mortgage.

KFI (Key Facts Illustration) This is the illustration that the lender/broker give you detailing all the costs of the mortgage that you are considering. This is a quotation not an estimate.

With many mortgage deals there is a preferential rate initially. If you clear the mortgage during this initial period there will be an Early Redemption Charge (ERC) to pay. These charges normally end at the same time as the initial rate.

Discount rate – each lender has its own Standard Variable Rate (SVR) which is the rate that you pay if you are not on a special deal. The lender can change this rate whenever they like. They will offer rates that are SVR – a certain percentage. Again, when the SVR rises you mortgage rate goes up too.

The guidance contained in this site is subject to the UK regulatory regime and is therefore targeted at consumers based in the UK.
Lucra Limited is an appointed representative of Tenet Connect Limited, which is authorised and regulated by the Financial Conduct Authority.Tenet Connect Limited is entered on the Financial Services Register (www.fsa.gov.uk/register) under reference 149826.

 

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