Understanding the language of mortgages is crucial to securing the right deal for your home. This guide simplifies complex mortgage jargon and breaks down key terms, empowering you to navigate the mortgage landscape confidently.

AiP or MiP

AiP, short for ‘Agreement in Principle’ for a mortgage, is sometimes referred to as a ‘Mortgage in Principle’ or MiP. It serves as a preliminary indication of a bank’s willingness to lend you a specific amount based on the information you share regarding your income, expenses, and debts. This is an important step in the mortgage application process as it gives you an idea of how much you can borrow and helps you set a realistic budget for your property search. 

To apply for a mortgage, we need detailed information about your finances. This helps us determine the amount the lender can offer you and check your credit history with your consent. Rest assured that we take your privacy seriously and will only use your information for this purpose.

Annual Percentage Rate (APR)

APR is the Annual Percentage Rate of the total charge for credit; this is the standard way of working out the actual interest rate. All lenders are legally obliged to show the APR alongside quoted interest rates for each mortgage term. This enables you to accurately compare mortgages from different lenders to determine how much you will repay on your loan each month.

Bank of England Base Rate (BOEBR)

The Bank of England Base Rate is a key factor that determines the interest rates paid for loans, including your mortgage. Understanding this rate empowers you to make informed decisions about your mortgage.

Capital Repayment

There are two ways of repaying a mortgage: capital repayment or interest only. With a capital repayment mortgage, the capital and interest elements of the loan are paid off with each monthly instalment, with the balance reducing over the length of the loan term and being repaid in full at the end of the mortgage term. Interest Only is where you pay the monthly interest only and must have a suitable repayment vehicle to repay the loan at the end of the term.

Conveyancing

This is the legal process involved when buying or selling property. Most people use a solicitor or a licensed conveyancer when buying or selling a property because there’s quite a lot of detailed work to do when transferring ownership of a property. These professionals handle tasks such as conducting property searches, preparing and reviewing contracts, and ensuring that all legal obligations are met. Lenders will only use certain solicitors from a panel; we know which solicitors are on the panel and can recommend cost-effective solicitors.

Disbursements

These are the fees your solicitor has to pay on your behalf (e.g. Stamp Duty, Land Registry fees and search fees), which will be added to your conveyancing bill from the solicitor upon completion of the buying or selling of a property.

Discount Rate

A discounted rate mortgage offers reduced repayments for a given term. This interest rate is discounted from the published lender’s standard variable rate for an agreed period from the start of the mortgage. The standard rate can increase, but the discount remains fixed during the agreed period.

Equity

This is the positive difference between the value of your property and the amount of any outstanding loans secured against it. In simpler terms, it’s the part of your property that you actually own, without any debts or loans on it. For example, if your home was worth £400,000 and the mortgage on your property was £150,000, your equity would be £250,000.

Exit Fee

A mortgage exit fee is an administration charge your lender imposes when you pay off your mortgage in full before your agreed-upon term ends.

Fixed Rate

A Fixed Rate mortgage offers you the security of a constant interest rate agreed upon at the start of the mortgage. This rate will not change during the term of the fixed rate, giving you peace of mind and confidence in your financial planning.

Freehold

When you have the freehold on a property, you solely own the property and the land on which it is situated.

Interest Charges

These are the charges on a loan, calculated as a percentage of the total amount you borrowed on your mortgage.

Interest Only

An interest-only loan is a loan on which, for a set term, the borrower pays only the interest on the principal balance, with the principal balance unchanged. If you choose an interest-only mortgage, you are responsible for ensuring that you have sufficient funds available to repay your mortgage at the end of the term. Suitable repayment vehicles for an interest-only mortgage could include investments, savings, or other assets that are expected to appreciate in value over time.

Leasehold

This is a system used mainly in England and Wales, where you own the property for a set period before handing back ownership to the freeholder. When you hold a leasehold on a property, it remains the property of the freeholder. A leasehold will set out the details of the leaseholder’s obligations for repairs and maintenance of the property.

Legal Fees

These are the fees a solicitor or other qualified individual charges to carry out the legal work associated with buying a property.

Mortgage Rate

The term “mortgage loan interest rate” refers to the percentage of the loan amount the lender charges the borrower as interest over the loan term.

Offer of Loan

The mortgage approval document outlines the terms and conditions that will apply during your mortgage term.

Re-Mortgaging

This is used when moving your mortgage from one lender to another without moving house. You may do this to save money. This might be possible by switching to another mortgage product with the same lender or switching your mortgage to a competitor. Re-mortgaging can be a smart financial move if you can find a better deal with lower interest rates or more favourable terms. However, it’s important to consider any fees or charges associated with re-mortgaging and to ensure that the benefits outweigh the costs.

Searches

Your solicitor typically makes enquiries at the Land Registry, Land Charges Register, and Local Authorities to ensure everything is in place for the property and land you plan to purchase.

Stamp Duty

Stamp Duty Land Tax (SDLT) is charged on land and property transactions in the UK. The tax is charged at different rates and has different thresholds for various property types and transaction values.

Title

This is the legal right to the ownership of your property.

Tracker Mortgages

This is a variable-rate mortgage, and the interest rate is linked directly to the Bank of England Base Rate. Therefore, when the Base Rate changes, the rate on your tracker mortgage changes by the same amount.

Mortgage Broker

A Mortgage Broker is an adviser that helps you get a mortgage. They will search the mortgage market to help you find the right product from thousands of deals. Their role is to understand your financial situation and needs, and then recommend the most suitable mortgage options for you. They can also help you with the application process, including preparing the necessary documents and liaising with the lender on your behalf.

Using a broker gives you a mortgage expert on your side. Brokers must pass professional qualifications to give advice and are regulated by the Financial Conduct Authority.

Valuation

This is an independent assessment of a property’s value carried out by an approved surveyor and paid for by you, the customer. All lenders insist that a valuation be carried out on a property. The bank or building society uses the valuation to decide how much they are willing to lend you. In other words, the valuation is an estimate of how much the property is worth in the current market. It’s an important step in the mortgage application process as it helps the lender determine the loan-to-value ratio (LTV) and the amount they’re willing to lend you.

Variable Rate

This rate can vary throughout your mortgage and is typically based on the lender’s variable rate.

Excited to discover more? Reach out to our experienced advisers, and we’ll provide an overview of available options while delving into the best-suited solution for you. Call us on 0333 335 6595 or message us to get started!