|
Mortgage jargon does not have to jarr you. Here's our jargon buster to help you sail through the entire process of obtaining a mortgage for your dream home.
Mortgage - A mortgage is a loan taken out in order to buy a home. The property that you buy is the security against which your repayments are held. In case you miss out on the repayments; you stand the risk of losing your home as the lender can legally claim it.
APR - Annual Percentage Rate, this is the feature that is used to compare the costs of credit from different mortgage lenders. The APR is not just an interest rate but also includes up front and ongoing costs of taking out a mortgage.
Capital and Interest Mortgage - In this type your monthly repayments include the capital and the interest on the mortgage. Also referred to as a repayment mortgage.
Discounted Rate - In this type, the borrower gets a guaranteed reduction off the standard variable rate for an agreed period of time. After the expiry of this period, the rate will go back to the standard variable rate.
Cash back - An amount of money, either fixed or a percentage of a mortgage, which you can opt to receive when you fully repay the mortgage. The catch being that most lenders who offer cash back are likely to get this money back through higher interest rates that they may have charged.
Early redemption charges - Redemption is when the borrower pays off the capital and the interest on the mortgage and thus has full rights to the property. Early redemption fees are charges incurred for paying off the mortgage early, either to buy the house outright or when you want to re-mortgage. Be sure to check out these clauses before taking out a mortgage.
Interest-only mortgage - In this type of mortgage, the monthly repayments go towards paying off only the interest on the mortgage. This type of mortgage needs a separate investment vehicle that will help you accumulate the funds that is needed to pay off the capital in a lump sum at the end of the term.
ISA - An ISA is an Individual Savings Account, which is a tax-free method of owning shares or building up a cash savings.
Variable Rate - Variable rate is when the interest rate that you pay on your mortgage depending on the changes in the lender's standard variable rate, with your interest payments changing accordingly on your mortgage.
| 
