Navigating the world of mortgages can be complex, with a plethora of terms and phrases that can be confusing for both first-time homebuyers and seasoned investors. Understanding these terms is crucial to making informed decisions about your mortgage options. This guide provides a detailed explanation of the most common mortgage-related terms, helping you to demystify the jargon and better understand the intricacies of mortgage transactions.
When a borrower has a history of financial difficulties, such as missed loan payments, bankruptcies, or County Court Judgments (CCJs), they are said to have adverse credit. This can impact their ability to secure a mortgage, leading to the need for specialized mortgage products, including:
The APR represents the annual cost of a mortgage, including interest and other fees, allowing borrowers to compare different mortgage products. It's a broader measure of the cost to the borrower than the interest rate alone.
This is a charge levied by lenders for setting up a mortgage. It can be due upon application or at the completion of the mortgage process and is common with fixed-rate, discount, or cashback mortgages.
This is a tenancy agreement that gives landlords the right to reclaim their property after a specified period, as outlined in the agreement. Most new tenancies are automatically ASTs unless specified otherwise.
Under the Housing Acts of 1988 and 1996, landlords can charge market rent and reclaim the property under certain conditions.
A short-term loan that allows the purchase of a property before the sale of another. It's a complex financial product that should be considered with professional advice.
A loan used to purchase a property, with the property itself serving as collateral.
The ratio of the mortgage amount to the appraised value of the property, expressed as a percentage. For example, a £90,000 mortgage on a £100,000 property has an LTV of 90%.
An insurance policy for the lender, protecting against the property's value falling below the mortgage amount. It's typically required for borrowers with a deposit of less than 10%.
The legal process of transferring property ownership from the seller to the buyer, usually conducted by a solicitor or licensed conveyancer.
The point at which the buyer and seller legally commit to the sale and purchase of a property, often accompanied by a deposit payment.
The final stage in the property transaction process, where the buyer becomes the legal owner of the property.
A mortgage with an interest rate that remains constant for a set period, providing stability in repayment amounts.
A mortgage where the borrower pays only the interest on the loan for the mortgage term, with the responsibility to repay the principal at the end of the term.
An interest rate that fluctuates over time, causing mortgage payments to increase or decrease accordingly.
A penalty charged by lenders if a mortgage is paid off before the end of the agreed term, particularly during a fixed or discounted rate period.
A fee paid for the lender's assessment of the property's value to ensure it's suitable as mortgage security.
A tax paid by the buyer of a property, with rates varying based on the property's value. As of the knowledge cutoff in 2023, the thresholds and rates may have changed, so it's important to consult the latest government guidelines or a financial advisor.
Insurance that covers damage to the structure of a property, which is often a requirement when taking out a mortgage.
A policy that can cover mortgage repayments in the event of the policyholder's death, ensuring the loan does not become a burden to survivors.
Insurance designed to repay the mortgage upon the death of the insured, with variations such as Level Term Assurance and Reducing Term Assurance to match the balance of a repayment mortgage.
A sequence of buyers and sellers involved in linked property transactions, where each sale and purchase is dependent on another.
When a seller accepts a higher offer from a new buyer after already accepting an initial offer, leaving the original buyer without the property.
The process of paying off one mortgage with the proceeds from a new mortgage, often done to take advantage of better interest rates or to borrow additional funds against increased property value.
The lender's process of assessing the risk of a loan application, considering the borrower's creditworthiness and the property's value.
For a more in-depth understanding of these terms and how they apply to your specific situation, it's advisable to consult with a mortgage advisor or financial expert. The mortgage landscape is ever-evolving, with new products and regulations frequently introduced. Staying informed can help you make the best decisions for your homeownership journey.
A Guide to UK Buy to Let Mortgages
Essentially there is little difference between the process that one follows for a buy to let mortgage in the UK than there is for any other type of mortgage. The lender still has to consider your credit worthiness, the value of the property, how much down payment you can afford and all of the other usual considerations. However, in addition, the lender will usually be interested in what the market is for letting properties in the same area as the one that you are thinking of investing in. The lender will look at property taxes and average rents for similar properties. Other than those particulars, however, the process moves along nearly the same.
How to save money by using an Independent Commercial Mortgage Broker
Being a creature of habit can cost you plenty when it comes to applying for a commercial mortgage instead of going through an independent commercial mortgage broker. Let me tell you why.
Securing a US Commercial Mortgage
What’s the most efficient way to secure a US Commercial Mortgage? Work with a mortgage broker who specializes in this area. If you’ve ever applied for a loan, you’re familiar with the mountain of paperwork you are required to complete during the process. The lender takes the applicant’s information, runs it thought their guidelines and formulas and after waiting many weeks, a decision is made to either approve or deny the loan. If approved, the transaction can proceed. If denied, the applicant has to begin the process all over again.
