Mortgage Types
| Term | Description |
|---|---|
| Fixed rate | A type of mortgage where the interest rate remains the same for a set period of time, typically between two and five years. This provides borrowers with certainty and stability, as their payments will not change during the fixed-rate period. |
| Variable rate | A type of mortgage where the interest rate can change over time based on market conditions. This means that borrowers may see their payments increase or decrease over time, depending on changes to the economy. |
| Repayment mortgage | A type of mortgage where the borrower makes regular payments towards both the principal and the interest on the loan. This means that the balance of the mortgage will gradually decrease over time, until it is fully paid off. |
| Interest-only mortgage | A type of mortgage where the borrower only pays the interest on the loan for a set period of time. At the end of this period, the borrower is typically required to either pay off the balance of the mortgage or refinance it. |
| Buy-to-let mortgage | A mortgage specifically designed for landlords who are purchasing a property to rent out. Buy-to-let mortgages often require a larger deposit and have higher interest rates than standard residential mortgages. |
| Guarantor mortgage | A mortgage where a third party, usually a family member, guarantees to make the repayments if the borrower defaults. |
| Adverse credit mortgage | A type of mortgage designed for borrowers with a poor credit history or a low credit score. |
| Subprime mortgage | A type of mortgage designed for borrowers with poor credit histories or a low credit score. |
| Cashback mortgage | A mortgage where the lender provides a cash incentive to the borrower, typically a percentage of the mortgage amount, at the start of the mortgage. |
Mortgage Repayment Types
| Term | Description |
|---|---|
| Capital repayment | A type of mortgage repayment where the borrower pays off both the interest and a portion of the loan balance each month. This results in the mortgage being fully paid off at the end of the term. |
| Interest-only repayment | A type of mortgage repayment where the borrower only pays the interest each month, with the balance of the loan being paid off at the end of the term. |
Mortgage Rates
| Term | Description |
|---|---|
| Interest rate | The rate at which the borrower is charged interest on the mortgage. Interest rates can be fixed, meaning they remain the same for a set period of time, or variable, meaning they can change over time based on market conditions. |
| Base rate | The interest rate set by the Bank of England, which influences the interest rates offered by lenders. |
| Standard variable rate (SVR) | The interest rate charged by the lender after any initial fixed or discounted rate period ends. |
| Tracker rate | A variable interest rate that tracks the Bank of England base rate plus a set percentage. |
| Discounted rate | A mortgage where the interest rate is set below the lender’s SVR for a set period of time. |
| Capped rate | A type of mortgage where the interest rate is variable but has an upper limit or “cap” on how high it can go. |
| Base rate tracker | A type of mortgage where the interest rate tracks the Bank of England base rate. |
| Reversion rate | The interest rate charged by the lender after any initial fixed or discounted rate period ends. |
| Interest rate cap | A limit on how high the interest rate can go on a variable rate mortgage. |
Mortgage Fee’s and Charges
| Term | Description |
|---|---|
| Arrangement fee | A fee charged by the lender to set up the mortgage. This fee can be paid up front or added to the balance of the mortgage. |
| Redemption penalty | A fee charged by the lender if the borrower pays off the mortgage before the end of the term. This fee is designed to compensate the lender for the interest they would have earned if the borrower had continued to make payments over the full term of the mortgage. |
| Early repayment charge (ERC) | A fee charged by the lender if the borrower pays off the mortgage early. This fee is designed to compensate the lender for the interest they would have earned if the borrower had continued to make payments over the full term of the mortgage. |
| Exit fee | A fee charged by the lender when the mortgage is paid off in full, typically at the end of the mortgage term. |
| Higher lending charge | A fee charged by the lender when the LTV ratio exceeds a certain threshold, typically 90%. |
| Conveyancing fees | The fees charged by the solicitor or licensed conveyancer for carrying out the legal work involved in transferring ownership of the property. |
| Mortgage valuation fee | The fee charged by the lender for carrying out a valuation of the property being purchased. |
| Mortgage indemnity insurance | Insurance that protects the lender against losses if the borrower defaults on the mortgage. |
| Early repayment charge calculator | An online tool that helps borrowers calculate how much they would have to pay if they paid off their mortgage early. |
| Refinancing | The process of switching from one mortgage to another, often to get a better interest rate or to release equity from the property. |
| Mortgage payment holiday | A temporary break from making mortgage payments, typically granted by the lender in times of financial difficulty. |
Mortgage Features
| Term | Description |
|---|---|
| Equity release | A type of mortgage where the borrower releases equity from the property to receive a lump sum or regular payments. |
| Offset mortgage | A type of mortgage where the borrower’s savings are offset against the outstanding mortgage balance, reducing the amount of interest charged. |
| Mortgage protection insurance | Insurance that helps borrowers meet their mortgage payments in the event of illness, injury, or unemployment. |
| Negative equity protection | Insurance that protects borrowers from falling into negative equity if the value of their property falls below the outstanding mortgage balance. |
| Portable mortgage | A mortgage that can be transferred from one property to another when the borrower moves home. |
| Portable mortgage rate | A mortgage rate that can be transferred from one property to another when the borrower moves home. |
| Mortgage affordability calculator | An online tool that helps borrowers calculate how much they can afford to borrow based on their income, expenses, and other factors. |
| Overpayments | Paying more than the required monthly payment on the mortgage to reduce the outstanding balance and the interest charged. |
| Underpayment | Paying less than the required monthly payment on the mortgage, resulting in the outstanding balance and interest charged increasing over time. |
| Flexible mortgage | A mortgage that allows borrowers to make overpayments, underpayments, or take payment holidays without incurring penalties. |
| Top-up mortgage | A mortgage taken out on top of an existing mortgage, often to release equity from the property. |
Mortgage Processes
| Term | Description |
|---|---|
| Lender | The institution or person that provides the mortgage. Lenders can be banks, building societies, or specialist mortgage providers. |
| Borrower | The individual or individuals who take out the mortgage. Borrowers are responsible for making the payments on the loan, and are typically required to provide proof of income and meet certain creditworthiness criteria. |
| Mortgage broker | A professional who helps borrowers find and apply for mortgages. Mortgage brokers work with a range of lenders to find the best mortgage product for each borrower’s needs. |
| Valuation | The process of determining the value of the property being purchased. This is typically done by a professional surveyor, and is used to ensure that the lender is not lending more than the property is worth. |
| Survey | A report on the condition of the property being purchased. Surveys can range from basic condition reports to more detailed building surveys, and are designed to identify any issues with the property before the sale |
| Conveyancing | The legal process of transferring ownership of the property from the seller to the buyer. Conveyancing is typically carried out by a solicitor or licensed conveyancer. |
| Stamp duty | A tax paid by the buyer when purchasing a property over a certain value. The amount of stamp duty payable depends on the purchase price of the property and the current rates set by the government. |
| Help to Buy | A government scheme designed to help first-time buyers get on the property ladder by providing a loan for up to 20% of the property’s value (40% in London). |
| Shared ownership | A type of homeownership where the buyer purchases a share of the property and pays rent on the remainder. The buyer can gradually purchase more shares over time. |
| First-time buyer | A person who is purchasing their first property. |
| Joint mortgage | A mortgage taken out by two or more people, usually for the purpose of purchasing a property together. |
| Mortgage term | The length of time over which the mortgage is being repaid, usually between 25 and 30 years. |
| Negative equity | When the outstanding mortgage balance is higher than the value of the property. |
| Remortgage | The process of switching from one mortgage to another, often to get a better interest rate or to release equity from the property. |
| Re-mortgage calculator | An online tool that helps borrowers compare different mortgage products and calculate how much they could save by switching. |
| Underwriting | The process of assessing a borrower’s creditworthiness and ability to repay a mortgage. |
| Mortgage deed | The legal document that sets out the terms and conditions of the mortgage. |
| Mortgage offer | The document issued by the lender that sets out the terms and conditions of the mortgage, including the interest rate, fees, and repayment schedule. |
| Intermediary | A professional who helps borrowers find and apply for mortgages, typically a mortgage broker or financial adviser. |
| Buy-to-let stamp duty | A higher rate of stamp duty that must be paid by those purchasing a second home or a buy-to-let property. |
| Annual Percentage Rate of Charge (APRC) | A measure of the total cost of a mortgage, including interest and fees, expressed as an annual percentage rate. |
| Bridging loan | A short-term loan used to bridge the gap between the purchase of a new property and the sale of an existing property. |
| Buy-to-let mortgage calculator | An online tool that helps landlords calculate how much they can borrow and how much they will need to repay on a buy-to-let mortgage. |
| Completion | The point in the home buying process where the sale is finalized, the funds are transferred, and the keys are handed over to the buyer. |