Firstly you may be wondering what a mortgage is?

Simply, a mortgage is like any other kind of loan – you borrow money, and you pay it back with interest over a period of time. But it has one key difference: it’s secured against your home. So if for any reason you can’t repay it, the lender can sell your home to recover their money.

Secondly you may be asking how does a mortgage work?

Again put simply, you take out a loan based on how much you can afford and the value of the property, for a length of time agreed between you and the lender.

You are charged interest on the loan, usually based on the Bank of England base rate, which is reviewed monthly.

You pay the mortgage back in one of two ways, repayment or interest-only.

You can choose different deals for your interest rate, such as fixed or discounted  

 

At Premier we take care of almost all of your paperwork for you making the entire process easy, but in case you ever wonder what some of the terminology or jargon used when it comes to mortgages hopefully you will find the answer below.

 

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.

Buy-to-let mortgage
A loan you take out to buy a property which you intend to rent to tenants.

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.

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.

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
A mortgage where you only pay the interest charges of the loan each month. This means you are not reducing the loan amount (or capital) itself, and this will need to be repaid in some other way.

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. A mortgage broker may recommend a mortgage for you or they may provide you with information to enable you to make your own choice.

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.

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.

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.

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.

 

If your still uncertain about what something means then our trained mortgage advisors can help. Just pick up the phone and call us on 0845 217 1577 where we will be happy to help.