Do you sometimes wonder if mortgage professionals speak in tongues? Buying a property seems to come with a language of its own.
Agreement in principle
Often abbreviated as AIP or called decision in principle (DIP). This is an indication of what the lender will lend you based on the details provided about your income, expenses, and debts.
Annual percentage rate
The APR is the cost you pay each year to borrow money, including fees, expressed as a percentage.
The fees that your mortgage lender will charge for setting up the loan. It can be paid on time or built into the rest of what you owe.
Prepayment Fee (ERC)
If your mortgage agreement has an ERC, your lender may charge you if you overpay your mortgage or prepay the loan.
Fixed rate mortgage
Popular with buyers who want to know how much they will pay each month, this loan has a fixed interest rate for its entire term.
This type of mortgage will allow you to overpay, underpay, and even take payment leave.
You only have to pay the interest on your mortgage each month, not pay off the loan itself. First-time buyers will find it difficult to obtain an interest-bearing mortgage. Only a few lenders offer them and the loan criteria are strict.
Loan-to-value ratio (LTV)
How much is your mortgage compared to the value of your property. From a lender’s perspective, LTV is essentially a risk assessment. If you take out a £ 150,000 loan on a £ 200,000 property, the LTV is 75%. The lower your LTV, the better the offers available to you.
Mortgage Payment Protection Insurance (MPPI)
is designed to pay off your mortgage each month if you are unable to work due to illness or injury.
The length of time you take out a loan. Traditionally, it was 25 years, but many people extend it over longer periods to reduce monthly expenses.
When the value of your home drops below the amount remaining on your mortgage.
Stamp duty exemption
The holidays may be over, but first-time buyers are still entitled to stamp duty property tax (STDL) relief, paying no stamp duty on the first £ 300,000 of the property’s value .
Standard variable rate
An SVR mortgage is the default interest rate you will be transferred to after your fixed-term contract ends.
Most tracker rates follow the Bank of England base rate plus an interest spread, so your monthly payments will go up and down.
Variable rate mortgage
A type of home loan where the interest rate is not fixed.