When you’re shopping around for your mortgage, you’ll often come across words and phrases that you don’t understand. Don’t worry- this happens to everyone. In this article we’ll be running through some of those you’ll come across.
APR
This stands for Annual Percentage Rate. This is the total cost of your mortgage, including all fees and interest. This is based on the entire term of the mortgage, so may not be useful when comparing deals.
Arrangement Fee
This is the cost of the set-up fee for your mortgage. A majority of lenders will allow this to be added to the loan. You may want to avoid this, as you will end up paying interest on the fee for the duration of the loan.
Arrears
If you fall into arrears this means you have ‘defaulted’ or missed a mortgage payment.
Base Rate
This is the rate of interest set by the Bank of England, which tracker and lender’s standard variable rates commonly follow.
Buildings Insurance
This is a type of insurance that covers any damage to the structure of your home. You will need to have this in place to take out a mortgage.
Buy-To-Let
A buy-to-let property is bought with the intention of renting it out. Mortgage lenders can offer special mortgage deals for this scenario. This is usually more expensive than a residential mortgage, as there is a greater risk involved.
Capital
This is the amount of money you borrow to buy a property.
Capped Rate
Your mortgage’s interest rate will never exceed the upper capped limit, even if there are changes to the Bank of England’s base rate.
Cashback Mortgage
This is when your chosen lender gives you a specified amount of cash on completion, which can be used for things like decorating etc. This amount should be factored into the total cost of your mortgage over the initial period to decide whether it’s a good deal.
CCJ
This stands for County Court Judgement. These are made against you for non-payment of debts. If you have any CCJs, it may be difficult to find a mortgage lender.
Collar
If your mortgage deal has a collar, then your interest rate will not fall below a pre-specified amount. For example, if rates drop to 3.75% and your collar is 4% you will miss out on the savings the lower rate would bring.
Conveyancing
This is the legal process of buying and selling property. It can be done by solicitors or specially licensed conveyancers.
Current Account Mortgage (CAM)
Your mortgage, credit card and loan debts, and your current account and savings balances are combined into one account. Your credit balances offset your debts, meaning you only pay the interest on the difference between the two. These are often more expensive than conventional mortgages.
