MORTGAGE GLOSSARY

The Mortgage Affordability Assessment is carried out by brokers and lenders alike.  Your income and expenditure (everything from your shopping to outstanding loans and credit cards) is looked at to make sure you can afford to repay the mortgage loan repayments over the term of the loan.

 A statement from a mortgage lender confirming they’ll lend a certain amount before the purchase of your property is finalised.   The Agreement/Decision in Principle is value for 3-6 months depending on the lender.

 If someone is in “mortgage arrears” this means that they have failed to meet their contractual obligations in relation to their loan; in simple terms they have not made their monthly mortgage payment for 1 month or more. The lender has specific procedures to follow when dealing with borrowers who fall into arrears. Ultimately, falling into arrears may cost you your home if you do not take action to make them up. You should always contact your lender immediately if you have trouble paying your mortgage. 

 The Bank of England Base Rate (BBR) is set by the Bank of England (BOE) Monetary Policy Committee and is reviewed every month. The rate is used to control money flow in the economy and can move up or down. It is likely that a tracker product rate will be linked to BBR. This means that the interest rate charged on your mortgage will increase or decrease in line with changes in BBR. A discount rate is not usually linked to BBR but is likely to change if the lender decides to change their Standard Reversion Rate following a change in BBR. A fixed rate is not affected by changes in BBR during the fixed period. 

 A residential property bought with the sole intention of letting it to tenants on a long term basis. 

 A loan designed specifically for landlords to purchase a residential property they wish to rent out. These mortgages are generally set up as interest only. 

 A buy to sell mortgage is a short term mortgage that is suitable for property investors and developers who want to ‘fix and flip’. 

 The individual who undertakes the legal procedures involved in property sales on behalf of the buyer and seller, and the work they undertake. 

 An Early Repayment Charge is a charge you have to pay the lender, if you repay the whole or part of your mortgage within a stated period. If you take out a 5 year fixed rate mortgage with a lender, they will expect to make a profit on that money and will use the 5 year period to calculate their expected profit. If you repay your money early, they will not make the return they had expected and so will apply an ERC charge to make up the difference. You will find details of the early repayment charges in both percentage and monetary terms on your mortgage offer. 

A Let to Buy mortgage allows you to rent out your home and buy another property to live in.

The size of the mortgage as a percentage of the property’s value.

Most lenders use this percentage as part of their product pricing, charging a higher rate of interest as the loan to value increases. 

 Changing a mortgage without moving property to save money, change to a different type of mortgage or release equity from the property.