Below you will find the most frequently asked questions in relation to mortgages, which include important references and guides.
What is a Mortgage?
A mortgage is a loan, which is secured against your home. Similar to a standard cash loan, money is borrowed from a mortgage lender; bank or building society and sets up monthly repayments, which is paid back with interest and over a certain period of time. As this loan is secured against the home, if for any reason the monthly repayments cannot be made, the supplier of the mortgage can access the right to sell the property to recover their money.
What is Mortgage Advice?
Recommendations and information about everything related to mortgages; what they are, how they work, what deals are currently available etc. The company or individual that provides this advice should be regulated by the FSA.
What is an Interest Only Mortgage?
A mortgage where you only pay the interest charges of the overall loan on a monthly basis. Therefore, you are not actually reducing the overall loan amount, just the interest that the lender is charging.
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What is a Capped Mortgage?
A capped mortgage is a mortgage that has a maximum limit on the interest rate you will have to pay during a specific period.
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What is a Cash Back Mortgage?
This is a mortgage that gives money back to the borrower, which is often a percentage of the amount being borrowed. For example; with a 5 year term cash back mortgage, the borrower will receive a cash back rebate of up to 5% of the amount borrowed.
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What is a Collared Mortgage?
This is a mortgage that has a minimum interest rate, which you will pay during a specific deal period.
What is a Discounted Mortgage?
This is a mortgage that has a discounted, variable rate of interest for a certain period. After which, the rate will then increase.
What is a Standard Variable Rate Mortgage?
This is a loan from the mortgage lender at their usual rate.
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What is a Tracker Mortgage?
This is a variable mortgage that is above or below the Bank of England's base rate by a set percentage within a specific period.
What is a Re-Mortgage?
A re-mortgage allows you to change your mortgage to a different one.
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What is a Re-Payment Mortgage?
This is a mortgage that financially settles both the overall loan and the lenders interest at the same time. Therefore, if you keep up your monthly payments, by the end of the loan term, your mortgage will be fully paid for.
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What is Interest?
This is the charge from the lenders when you borrow their money. In effect, it is their charge and how they make their money.
What is Interest Rate?
Interest rate is the figure that determines how much interest you pay. The Bank of England is responsible for this and so interest rates can fluctuate during certain periods.
What is a Fixed Rate?
This is an interest rate that is fixed / set. Therefore it does not increase or decrease for a certain period of time.
What is a Mortgage Broker?
A mortgage broker helps give you an understanding of the different types of mortgages currently available in the market. They may advise you on a mortgage that would suit your circumstances and/or provide you with the relevant information to select the ideal mortgage for you.
What is an Annual Statement?
A statement provided by your mortgage lender, which is sent once per year showing your current account information; what you have paid to date, remaining balance etc.
What is an Approval in Principle?
This is a certificate, which some lenders will provide that shows (before credit checks and references are obtained) the amount of money they would be willing to borrow you. This is by no means a guarantee but can be helpful when you are searching for a property because you know, roughly what your budget would be.
What is APR?
APR stand for ‘Annual Percentage Rate’. This shows the overall cost of a loan giving a breakdown of loan terms, interest rates and any other additional costs.
What is an Authorised Firm?
A company / firm that have the full backing from the FSA to carry out regulated activities.
What is Capital?
This is the amount of money that you lend to purchase your home.
What is a Deposit?
A deposit is the amount of money you are using to help finance your new home. This is your own personal fund and not that, which you receive from the mortgage lender.
What is an Early Repayment Charge?
An early repayment charge is one that you may be required to pay if you end the terms of a mortgage deal before the set period. This could be done by settling the loan early or moving to a different lender.
Who is the FSA?
FSA stand for ‘The Financial Services Authority’. They are the financial ‘watchdog’ for the United Kingdom.
What is the Income Multiples?
This is where your current earnings are multiplied to find out how much you can actually borrow from a lender.
What is Loan to Value?
The percentage of money that you wish to borrow against the actual cost of the property.
What is a Register?
The register is a list of companies / firms that are sufficiently regulated to carry out financial services in the United Kingdom.
What is a Stamp Duty?
Stamp duty is a type of tax which, when purchasing a home, the buyer must pay on certain properties.
What is a Secured Loan?
Typically, a mortgage is a secured loan, which is tied into your home. Therefore, if, for some reason you do not keep up with your monthly repayments, the lender may be entitled to sell the property.
What is a Survey?
A survey is a report on the property you wish to purchase. It includes information about the property and its current state / condition.
What is a Term?
This is simply the length of your mortgage. Typically this will be between 25 and 30 years.
What is a Valuation?
A valuation is carried out to ensure that the property you wish to purchase is indeed the correct value. Most lenders request this to be done to make sure they are not lending more money than they should be.
