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Guide to mortgage terms
Listed below is a guide to mortgage terms. It is a useful list of definitions
of mortgage terms that may or may not be familiar to you.
Apr
This stands for Annual Percentage Rate. It takes into account all fees
and other costs in connection with the mortgage as well as the lenders
interest rate.
Advance
This is the actual amount of money that you borrow including any additional
fees that have been added.
Base Rate
The UK 's core interest rate which is set by the Bank of England.
Bridging Loan
A temporary loan that enables you to complete the purchase of a new home
before completing the sale of your existing property.
Capped Rate
These mortgages have a ceiling above which your payments will not rise.
Completion
The point at which the money to buy your new home is released to the
seller and ownership is transferred to you.
Conveyance
Legal document which transfers ownership of unregistered freehold land.
Disbursements
The fees your solicitor has to pay such as; stamp duty, land registry,
search fees, etc which will be added to your solicitor's bill.
Discounted Variable Rate
For a set period the interest rate charged will be a set percentage less
than the standard variable rate.
Early Redemption Charge
If you repay your mortgage in full before a specified date you may be
asked to pay an early redemption charge.
Equity
The difference between the value of your property and the amount of any
outstanding loans secured against it.
Fixed Rate
These mortgages offer a fixed interest rate for a set period of time.
Freehold
The term used to indicate ownership of property and the land on which
it stands.
Interest Only Mortgage
With this type of mortgage, the payments you make each month simply pay
the interest on the amount you borrow. At the end of the mortgage term
you must pay back the amount you originally borrowed.
Land Registration
This is a record held by HM Land Registry which lists the registered
owner of a plot and any legal charge that may be placed on it.
Lease
A document, which grants possession of a property for a fixed period
of time and sets out the obligations of both landlord and tenant such
as; payment of rent and repairs.
Leasehold
Arrangement between a landlord and tenant where the landlord agrees for
the tenant to lease the property for a fixed period of time.
Legal Charge
The legal document held by the Land Registry that identifies who has
a claim on your property.
Mortgage
A loan you take out to buy your home.
Mortgage Deed
Legal document that you must sign to say that the lender has a legal
charge over your property.
Mortgage Payment Protection Insurance
This is an insurance that will cover your mortgage payments should you
be unable to work due to an accident, illness or involuntary redundancy.
Mortgagor
Person who borrows money to buy a property.
Mortgagee
Building society, bank or other company which lends money against the
security of a charge over the property purchased.
Offer Letter
This is the official letter that the lender sends to you once all the
referencing and valuations have been carried out satisfactorily.
Quotation
Document that illustrates the cost of your mortgage.
Redemption Penalties
These are the charges that some lenders make if you decide to move your
mortgage.
Repossession
When a borrower fails to pay back their loan in accordance with its terms
and conditions, the lender can exercise their legal right to take ownership
of the property.
Repayment Mortgage
The payments you make each month will pay off the interest and an element
of the capital.
Redemption Figure
This is the amount to be repaid to your existing lender when you move
your mortgage.
Sealing Fee
This is the charge made by some lenders when they release the legal charge
over your home.
Searches
Enquiries made at the Land Registry, the Land Charges Register and Local
Authorities to ensure there is nothing to cause concern about title to
the land.
Stamp Duty
A government tax on the price you pay for your home.
Standard Variable Rate
This is the normal variable rate charged by a lender. This rate can go
up or down at any time at the lender's discretion.
Subject to Contract
A provisional agreement made between buyer and seller, before exchange
of contracts, which allows either side to back out without penalty.
Term
Length of time over which your mortgage loan is to be paid.
Title
Legal right to ownership of a property.
Title Deed
Legal document which transfers ownership of registered land.
Valuation
This is a report produced on behalf of the lender. Lenders use this to
decide whether they will offer a mortgage on the property.
Valuation Fee
A fee paid by the borrower for the lender's inspection of the property.
About the author
John Mussi is the founder of Direct Online Loans who help UK homeowners
find the best available loans via the www.directonlineloans.co.uk
website. |
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