Mortgage Glossary
Conveyancing
Conveyancing refers to the legal work carried out by a solicitor that enables you to legally buy or sell a property.
Current account mortgage
Current account mortgages are linked to your bank account.
With a current account mortgage, you’ll only be charged interest on the net amount you owe your lender after your savings or current account balance has been offset against the amount remaining on your mortgage.
Defaulting
Defaulting refers to a failure to fulfil a legal obligation – such as repaying a loan or mortgage.
Deposit
Your deposit is the amount you put down towards the cost of buying a property.
The remaining funding required will be through a mortgage, with the minimum deposit amount required by most lenders being 5% of the property’s purchase price.
In most cases, the bigger deposit you put down, the better interest rate you’ll be offered by your lender.
Discounted rate mortgage
Discounted rate mortgages offer borrowers a percentage reduction off the lender’s standard variable rate (SVR) for a period.
Because discounted rates are related to the lender’s SVR, if the SVR goes up, your rate will go up and if the SVR goes down, your rate will go down.
Most discounted rate mortgages come with early repayment charges and arrangement fees.
Early repayment charges (ERCs)
Early repayment charges (ERCs) are fees that are payable if you repay your mortgage in full or in part before the end of a set penalty period.
ERC fees generally range from 1% to 5% of the outstanding loan amount and normally apply for the period of a fixed interest rate or a tracker or discount period.
Equity
Equity is the amount of money that remains after you have paid off an outstanding mortgage.
Fixed Rate Mortgage
A fixed interest rate mortgage means the interest rate you pay is predetermined for a period – meaning your monthly repayments stay the same.
Fixed rate mortgages usually run for a specified number of years and following that period, your mortgage rate will revert to your lender’s standard variable rate (SVR).
If you pay off your mortgage, in full or in part, during the fixed rate period, early repayment charges may apply.
Flexible mortgage
Flexible mortgages offer various benefits.
These often include being able to vary your monthly payments in line with changing circumstances, take a payment ‘holiday’ or borrow back any money you have overpaid.
There are a wide variety of flexible mortgages available, and your mortgage broker will be able to provide more details if you’re interested in these types of mortgages.
Freehold
If you own the freehold of a property, this means you own both the property itself and the land it stands on, with no time limit on the period of ownership.
Guarantor
Guarantors are people who legally agree to take on the financial responsibility of someone else’s mortgage should they be unable to pay it back.
Parents and relatives are the most common forms of guarantor, but any guarantor should always seek legal advice before they take on the role.
Help to Buy mortgage schemes
Help to Buy allows first-time buyers to purchase a home with a 5% deposit and an equity loan.
