Annual Percentage Rate (APR)
Annual rate of interest paid on a mortgage. Use this to compare mortgage offers.
Your mortgage company will require you to take out building's insurance to cover the cost of rebuilding your property following a fire or other structural damage. You do not have to do this via your mortgage company and should shop around for the best deal.
In a house sale there is usually a chain of buyers and sellers, each dependent upon selling their own homes before they can move. Sometimes a sale can fall through and the chain can collapse causing significant delays. Buyers and sellers who have no chain, for example they are first time buyers or selling and moving into a retirement home, usually have more bargaining power in the market place.
Completion is when the money for the property is paid following the exchange of contracts. The property is now legally yours and you can move in.
This refers to the legal process of buying and selling property. It is usually carried out by a solicitor and involves the transfer of the property to the new owner.
Early Redemption Penalty
Some mortgages are fixed rate or discounted for a fixed period of time. There is usually a redemption penalty for paying back the loan early. Check with your mortgage company to find out of there is a penalty and what the penalty charge will be.
This type of mortgage is risky as you pay interest only to the lender. The rest of the mortgage payment goes into an independent scheme and is intended to pay off the loan at the end of the mortgage. However low interest rates and a poor-performing financial market can mean that there is a shortfall.
Equity is the amount of value in a house above the amount of outstanding mortgage and any loans secured on the property. Negative equity is where the value of a home has dropped below that of the amount owed on the mortgage.
Exchange of Contracts
The contract is the written agreement between the buyer and seller and marks the point at which the deal becomes legally binding. Once the solicitors exchange contracts a date for completion is fixed.
Fixed Rate Mortgage
A fixed rate mortgage means that the interest rate (APR) is fixed on a mortgage for a set number of years. It is an advantage if interest rates rise but buyers can lose out if they fall. There is usually a penalty for redeeming a fixed rate mortgage before the fixed term is up.
This is when a buyer accepts an offer on their property and withdraws it because they receive a higher offer. Unfortunately it is entirely legal and until the contracts are exchanged the buyer has no obligation to sell to you even if they have agreed the offer and you have paid for surveyor's and solicitor's fees.
Home Buyer's Report
This is a combination of the surveyor's report and a valuation of the property.
Most mortgage providers will insist or advise you to have life insurance in place to cover the cost of the mortgage if you die. You should also make sure that your Will is up to date to specify who would inherit your property.
This is the most common type of mortgage and means that you pay off a proportion of the loan each month and interest on the remainder.
A second mortgage is a loan which is secured on a property and is usually dependent upon the amount of equity. It is commonly approved for house improvements or essential repairs and can be granted to buy an ex partner's share of a property.
This is a tax that is paid on bought properties. Check with your solicitor for the amount of taxation you will have to pay on your property purchase. Note that if you are buying your ex partner's share of your current home you should not have to pay Stamp Duty.
A surveyor is a person who inspects and values a property. Most mortgage companies will arrange a surveyor to do a basic survey but it is usually best for a buyer to arrange an independent full structural survey to check for problems such as damp, rot, structural and electrical wiring problems.
Variable Rate Mortgage
A variable rate mortgage means that monthly payments are subject to variations in interest rates.