Buildings insurance
These policies pay the cost of repairing or rebuilding your home if it is damaged by unforeseen events. There are two separate sections 'buildings' and 'contents' and not all policies cover both. Anyone with a mortgage should take out adequate insurance to cover the re-building of the property. Most mortgage lenders will insist they do and it may work out cheaper to insure both contents and buildings together.
Buy-to-let mortgage
A loan you take out to buy a property in which you intend to rent to tenants. Buy- to-let investors should be aware that we are looking at a period of lower or negative values and should avoid borrowing more than a reasonable percentage of the overall value and budget for periods when you are not receiving rental income.
Capped mortgage
A mortgage that has a maximum limit (cap) on the interest rate you'll have to pay during a special deal period. Can offer a degree of protection against sharp base rate increases.
Cashback mortgage
A mortgage that gives you a cash sum on completion(often a percentage of the amount you're borrowing).
Contents insurance
Covers the cost of replacing possessions lost or damaged due to unforeseen events as detailed in the insurance policy. Extended contents cover usually cover possessions kept outside the home.
Discounted mortgage
A mortgage with a discounted variable rate of interest for a set period, after which the rate will increase.
Early repayment charge
A charge you may have to pay if you break off a mortgage deal - by paying it back early and/or moving to another lender.
Equity release
Older homeowners can release the equity in their property to boost their income or receive a cash lump sum, or a combination of both whilst still securely occupying their own home. When the property is sold, the plan provider reclaims their loan and any interest due with the remainder going towards the plan owner or their estate. Any future rise in the value of the home would also belong to the equity release plan provider.
Fixed rate
An interest rate that is fixed and doesn't move up or down for a set period of time.
Fixed rate mortgage
Some mortgage lenders will offer a period, normally 2 to 5 years, where the interest rate is fixed after which it will revert to the Standard Variable mortgage Rate. This can make budgeting for mortgage payments easier for borrowers in the first years.
Income multiples
The factor by which your earnings are multiplied to find out how much you can borrow.
Interest-only mortgage
A mortgage where you only pay the interest charges of the loan each month. This means you are not reducing the loan amount (or capital) itself, and this will need to be repaid in some other way. With a repayment mortgage, the loan is reduced to zero at the end of the term.
Loan-to-value
The percentage of mortgage money you want to borrow compared to the cost of a property.If the loan- to- value (LTV) exceeds 80%, some mortgage lenders will charge a higher rate of interest or some other penalty to accept the higher risk.
Mortgage broker
A Mortgage Broker can recommend a mortgage for you or they can provide you with information to enable you to make your own choice. Mortgage brokers can be independent and whole of market or have a restricted range ofmortgages available to them. Do ask a Mortgage Broker what his or her status is.
Mortgage
A loan which is secured against your property.
Mortgage protection insurance
Accident, sickness and unemployment insurance (or payment protection insurance) used to cover your mortgagepayments.
Offset Mortgage
A current account is used along side a mortgage, interest is calculated daily on the difference in the two balances.
Repayment mortgage
A mortgage that pays off both the capital and the interest at the same time. Pay all the repayments and themortgage will be fully repaid at the end of the term.
Stamp duty
A tax on the transfer of assets imposed by the Inland Revenue. Home buyers must pay Stamp Duty on properties above a set amount.
Standard variable rate mortgage
A loan at the lender's normal mortgage rate without any discounts or deals.
Sub-Prime
Where a mortgage borrower has a poor credit record, such as County Court Judgments (CCJs) or bankruptcy, they can find a loan from Sub-Prime lenders.
However, borrowers can expect to pay several percent over the normal lending rate.
Tracker mortgage
A mortgage with an interest rate that is usually linked to a particular rate that is set independently from the lender and moves up or down with it.
Valuation
A brief inspection, for the benefit of your lender, of the home you hope to buy. This is to make sure they are not lending more than the property is worth and that the property is suitable security for the mortgage, but this will not tell you if it is a good or bad buy. For your own peace of mind, you may want your own survey.
Variable interest rate
Interest rates offered by banks and financial institutions on loans or deposits which are liable to change according to circumstances. For example, a movement in the interest base rate set by the Bank of England would usually be an influence.
