In the world of mortgages, understanding the jargon and mortgage terminology can feel like deciphering a complex language. From APR to LTV, it’s easy to get lost in a sea of terms that may leave you feeling overwhelmed and confused. However, fear not! We wanted to shed some light on common mortgage jargon and explain why speaking to an expert broker, like 177 Mortgages, can be the key. You only need to understand the basics to unravel the confusion and secure the right mortgage for your circumstances.
What is mortgage jargon and why does it matter
Mortgage jargon refers to the specialised terminology that’s used across the mortgage industry. This specialised terminology is used by all parties across the mortgage process. From banks and other lenders to solicitors, surveyors and mortgage brokers, the wide range of terms and acronyms can be baffling to those not familiar with the mortgage process. Understanding this jargon is crucial because it allows you to make informed decisions when it comes to one of the most significant financial commitments of your life. And for those completely new to the mortgage markets – first time buyers, this lack of understanding can prove even more daunting.
Common mortgage jargon unveiled.
Let’s dive into some of the commonly used mortgage terms and demystify their meanings.
LTV (Loan-to-Value): LTV refers to the ratio of the mortgage loan amount to the appraised value or purchase price of the property. For example, if you have a £200,000 mortgage on a £250,000 property, the LTV would be 80%. A lower LTV will offer borrowers lower fixed and tracker rate products.
Fixed-Rate Mortgage: A fixed-rate mortgage is a type of mortgage where the interest rate remains constant for a specified period, usually 2, 3, 5, or 10 years. This provides borrowers with predictable monthly payments during the fixed-rate period. Great for you, if you want some stability in what has recently been a rapidly changing market and don’t want to be impacted by further potential increases to the Bank of England base rate.
Variable Rate Mortgage: A variable rate mortgage, also known as a tracker mortgage, has an interest rate that can fluctuate based on a benchmark rate, typically the Bank of England’s base rate. The monthly payments can go up or down depending on changes in the benchmark rate.
Standard Variable Rate (SVR): The SVR is the lender’s default interest rate that borrowers move onto after their initial fixed or discounted rate period ends. The SVR is typically higher than the initial rate and can change at the lender’s discretion. Most lenders make changes to their SVR based on changes to the Bank of England base rate.
APR (Annual Percentage Rate): The APR is a measure of the total cost of a mortgage, including both the interest rate and associated fees. It represents the yearly cost of the mortgage as a percentage of the loan amount.
Mortgage Agreement in Principle (AIP): An AIP is a preliminary decision from a lender indicating the amount they would be willing to lend based on an initial assessment of the borrower’s financial information. It helps give borrowers an idea of their borrowing capacity when house hunting.
Remortgage: Remortgaging refers to the process of switching your existing mortgage to a new lender or renegotiating the terms with your current lender. People often remortgage to secure a better interest rate, release equity, consolidate debts, make home improvements or switch to a different mortgage product.
Stamp Duty: Stamp Duty Land Tax (SDLT) is a tax imposed on property purchases above a certain threshold in the UK. The amount payable depends on the property price and the buyer’s circumstances. You can use our Stamp Duty Calculator to estimate the cost involved in buying a property in England.
Equity: Equity refers to the portion of the property that you own outright, calculated by subtracting the outstanding mortgage balance from the property’s current market value. Increasing equity can provide homeowners with additional financial flexibility.
Early Repayment Charges (ERC): ERCs are fees that borrowers may incur if they pay off their mortgage or make substantial overpayments before a specified period, typically during a fixed-rate or discounted rate period. If you are planning on making overpayments or paying off your mortgage it’s worth taking some expert advice before doing so.
These terms should provide a starting point for understanding common mortgage jargon in the UK. But you can find more in our Mortgage Glossary.
The Confusion Dilemma: Why Mortgage Terminology Can Be Overwhelming
The mortgage industry is filled with terminology that can be overwhelming for borrowers. The similarity between terms and the subtleties of their implications can lead to confusion. There are also people who may be too embarrassed to ask when they don’t understand something. With us you don’t have to worry, there is no such thing as a stupid question! Misunderstanding or misinterpreting these terms can have significant consequences, such as choosing an unsuitable mortgage or missing out on potential savings.
The Role of a Mortgage Broker
This is where a knowledgeable mortgage broker comes in. A mortgage broker acts as an intermediary between borrowers and lenders, guiding you through the complex mortgage landscape. They are well-versed in mortgage jargon and can help you decipher the terms, ensuring you fully understand the implications of each option. Working with a broker can ensure that you understand all the complexities and they can present you with the best options. Allowing you to ask as many questions as you need to feel confident in your decisions.
177 Mortgages: Your Trusted Guide
At 177 Mortgages, we pride ourselves on being a leading fee-free mortgage broker in the UK. Our experienced advisors specialise in demystifying mortgage jargon and providing clarity throughout the process. We believe that communication is key, and we are committed to bridging the gap between lenders and borrowers and working with the entire UK mortgage market.
Our team of experts takes the time to understand your unique financial situation and goals. We’ll walk you through the mortgage jargon, explaining the intricacies and answering any questions you may have. Our personalised guidance and tailored mortgage solutions ensure that you make informed decisions that align with your needs.
Customer Satisfaction Speaks Volumes
Don’t just take our word for it—our satisfied customers attest to the value we provide. Hear from some of our clients, who were first-time buyers and they were happy to share their experience:
We used 177 Mortgages to help us purchase our first home. Having never done this, we felt quite out of our comfort zone, but our mortgage advisor was patient and took the time to explain the process to us and helped us get the best available rate on the market. Even after the offer was issued, they were in regular contact with us to check how everything was going and would even give us updates after speaking to the lender and solicitors.James Page
Fantastic service from Mike and the team. Answered all my questions promptly and took time to help and explain things to me as I was a first-time buyer purchasing a new build. Even when the build was delayed and the mortgage offer needed to be extended, this was handled swiftly. Great communication throughout the whole process.Sally Hodge
Mortgage jargon doesn’t have to be a barrier to finding the right mortgage. By understanding the terminology and seeking the assistance of knowledgeable experts like 177 Mortgages, you can confidently navigate the mortgage landscape. Don’t let confusion hold you back—take that step toward clarity and secure the mortgage you deserve. Remember, at 177 Mortgages, we are here to help you decode the language of mortgages, providing friendly and professional guidance every step of the way. Get in touch today and we will answer any questions you may have on all things mortgage related!